Back From Lows

Aussie bonds are off their session extremes, sitting little changed from levels witnessed before the release of the RBA’s quarterly SoMP. Meanwhile, U.S. Tsys stuck to a tight range, providing little by way of meaningful, lasting direction for ACGBs throughout the Sydney session (coiling ahead of NFP data due in the NY session).

• Cash ACGBs run 3.0-5.5bp richer across the curve, with the belly leading the bid. YM and XM are +3.5 and +5.0, with the latter operating a little below ts overnight peaks after failing to meaningfully break above those levels earlier. Bills run 2 ticks cheaper to 2 ticks richer through the reds.
• The latest round of ACGB Apr-2027 supply went smoothly, with the weighted average yield pricing 2.01bp through prevailing mids (per Yieldbroker estimates), while the cover ratio dipped to 3.14x - below the six-auction average at 4.13x, but not suggesting anything by way of a worrying decline in demand at that level. The easily digestible DV01 on offer (A$321K) and the fact that the line is borrowed via the RBA’s SLF (indicating wider demand for access to the line) likely aided the firm pricing.
• The release of the RBA’s quarterly Statement on Monetary Policy (SoMP) did little to rock ACGBs, with the major economic forecasts having already been released in Tuesday’s post-meeting statement. The highlights surrounding the release remains the lifting of the RBA’s inflation outlook to 7.75% by Dec ’22, with unemployment expected to bottom out by end-’22 before rising to 4% by end ‘24. RBA assumptions surrounding the cash rate at year end were in line with the midpoint of analyst and market expectations, meaning there wasn’t any meaningful market reaction to that verse of the release.
• The release of the weekly AOFM issuance slate similarly saw little reaction in the Aussie bond space, with three rounds of ACGBs on offer for a total of A$1.8bn.
• Monday will see July foreign reserves headline the data docket, with A$300mn of ACGB Apr-2037 on offer via auction.