Bear Flattening Continues, RBA OIS Shifts Higher Again

YM & XM have failed to challenge their respective overnight bases thus far, although the combination of local participants adjusting to Friday’s move in global core FI markets and the broader weakness in bond markets observed through early Asia-Pac trade keeps the pressure on.

• Cash ACGBs run 3-10bp cheaper across the curve, with 3s representing the weakest point as the bear flattening remains intact as the 3-/10-Year yield curve continues to operate within touching distance of cycle flats.
• Bills run 8-20bp lower through the reds, with OIS pricing for the October RBA meeting now at ~44bp and terminal rate pricing up to ~4.35%, 15-20bp higher vs. levels seen late on Friday, but still shy of the ~4.50% seen in June.
• The 3-/10-Year EFP box has flattened, with 3-Year EFP ~5bp wider and 3-Year EFP little changed, likely aided by payside rate hedging in 3s on the aforementioned OIS repricing.