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AUSSIE BONDS: Cheaper Going Into RBA Decision

AUSSIE BONDS
RegionGlobalBulletAPACFixed Income BulletsAustraliaMarkets

ACGBs (YM -5.0 & XM -2.0) are holding cheaper after dealing in narrow ranges in today’s Sydney session ahead of the RBA Policy Decision. While the cash rate is unanimously expected to remain at 4.35%, the meeting statement will be closely analysed for any shifts in tone. 

  • (AFR) Bullock says the economy is hot. Chalmers says it’s not. Who is right? (see link)
  • Cash ACGBs are 2-5bps cheaper. The AU-US 10-year yield differential at +27bps, near the upper limit of the +/-30bps range maintained since November 2022. A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is about 11bps above fair value, estimated at +18bps.
  • Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session, with a flattening bias.
  • Swap rates are flat to 2bps higher, with EFPs ~2bp tighter and the 3s10s curve flatter.
  • The bills strip pricing is flat to -3.
  • RBA-dated OIS pricing is little changed today. However, the pricing for 2025 meetings remains 1-7bps above pre-CPI levels from last Wednesday.
  • The market has 2bps of easing by year-end, with an 8% probability assigned to a 25bp rate cut at today’s meeting.
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ACGBs (YM -5.0 & XM -2.0) are holding cheaper after dealing in narrow ranges in today’s Sydney session ahead of the RBA Policy Decision. While the cash rate is unanimously expected to remain at 4.35%, the meeting statement will be closely analysed for any shifts in tone. 

  • (AFR) Bullock says the economy is hot. Chalmers says it’s not. Who is right? (see link)
  • Cash ACGBs are 2-5bps cheaper. The AU-US 10-year yield differential at +27bps, near the upper limit of the +/-30bps range maintained since November 2022. A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is about 11bps above fair value, estimated at +18bps.
  • Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session, with a flattening bias.
  • Swap rates are flat to 2bps higher, with EFPs ~2bp tighter and the 3s10s curve flatter.
  • The bills strip pricing is flat to -3.
  • RBA-dated OIS pricing is little changed today. However, the pricing for 2025 meetings remains 1-7bps above pre-CPI levels from last Wednesday.
  • The market has 2bps of easing by year-end, with an 8% probability assigned to a 25bp rate cut at today’s meeting.