Bear Steepening

ACGBs sit a little off session lows after cheapening throughout the Sydney session, more than unwinding the limited bull steepening in Aussie bond futures overnight. The move lower was aided in part by a modest early downtick in U.S. Tsys (fleshed out elsewhere), with little in the way of overt macro headline drivers and local economic data releases to further explain the move lower later in the day. Cash ACGBs run 5.0-6.5bp cheaper across the curve, bear steepening. YM and XM are -4.0 and -6.0, respectively, after breaching their overnight lows and deal a shade above worst levels of the Sydney session. The 3-/10-Year EFP box is steeper, with 3-Year EFP little changed and 10-Year EFP wider, while Bills run +1 to -10 through the reds, twist steepening.

• The AOFM’s weekly issuance slate announced for next week will see a total A$1.8bn in ACGBs and A$2.5bn of Notes on offer. Aussie bonds moved lower after the release, with the step up in ACGB DV01 on offer possibly aiding the weakness, which accelerated on the aforementioned break of overnight lows in YM & XM.
• The latest round of ACGB Nov-27 supply went well, with the weighted average yield printing 2.68bp through prevailing mids (per Yieldbroker) while the cover ratio improved to 3.41x, bouncing from the 2.53x seen previously (albeit with a lower amount on offer at today’s auction). Outright yield levels were sufficient to drive demand at the auction despite their recent move away from cycle cheaps, with the cheapness of 5s against 3s and 10s (in z-spread terms) providing another positive for smooth digestion.
• Monday’s local docket will see A$300mn of ACGB Jun-51 on offer, with no economic releases of note scheduled.