Bear Flattening Holds

A shift higher in RBA terminal rate pricing & payisde flow in swaps, which was linked to Wednesday’s move in the likes of Fed & BoC pricing, applied further pressure to ACGBs in Sydney trade, which allowed the space to extend on the weakness seen in futures during the overnight session.

• That leaves YM & XM -13.0 apiece on the day into the bell, a little off of worst levels, with bear flattening observed on the wider cash ACGB curve, where 11-13bp of cheapening was seen across the major benchmarks.
• The latest round of labour market data saw a brief bid come in, with less than 1K of jobs added in September (vs. BBG median of +25K), while the unemployment rate and participation rates held steady, matching expectations. A reminder that leading labour market indicators have flagged a slight colling in the labour market, although vacancies have stuck at elevated levels.
• The space looked through the latest BBG source piece re: a potential trimming of the Chinese COVID quarantine for international travellers.
• Bills run 3-17bp cheaper through the reds, with RBA dated OIS pricing a terminal rate of ~4.25%.
• A$700mn of ACGB Apr-25 supply and the release of next week’s AOFM issuance slate headline the domestic docket on Friday.