Australia Joins Bond Market Rout On Return From Holiday

Aussie bonds tumble across the curve as the space plays catch-up with market developments since the closing bell on Friday, as domestic financial markets re-open after a public holiday.

• Over the Australian long weekend, an expectation-beating CPI print triggered aggressive hawkish Fed repricing. A WSJ piece flagging potential for a 75bp fed funds rate rise this week played into that narrative, leading to a further addition of hawkish FOMC bets. This resulted in sharp Tsy sell-off which spilled over into global bond markets.
• This morning has seen continued hawkish RBA repricing on the back of expectations of more aggressive Fed tightening. Meeting-dated OIS prices ~52bp worth of cash rate target hikes come the end of the July 5 meeting of RBA Board, up ~4bp on the day and some 20bp above where it sat in the immediate wake of the last monetary policy decision.
• When this is being typed, cash ACGB yields sit 21.3-37.8bp higher and the curve runs flatter, as the rate-sensitive 3-Year ACGBs underperform. The main futures contracts have sank, with YM last -25.8 & XM -16.4. Bills trade 23-32 ticks lower through the reds.
• The space has shrugged off the release of CBA household spending figures. Focus turns to NAB Business Confidence & an auction for 2.50% 20 Sep ’30 I/L Bond.