Bear Steepening In Post-Holiday Catch Up

Much like in NZGBs, spill over from the latest rollback of COVID restrictions in China (with the bulk of the focus falling on the loosening of international travel restrictions) which pressured core global FI markets on Tuesday, along with catch up to Friday’s cheapening in U.S. Tsys, is applying pressure to ACGBs after the Christmas break.

• ACGBs have bear steepened as a result, with the major cash benchmarks 13.5-17.0bp cheaper in early Sydney trade, while the AU/U.S. 10-Year yield spread continues to operate around the +15bp mark after its recent run of widening.
• YM is -15.0, while XM is -17.0.
• Bills print 4-13bp cheaper through the reads, bear steepening.
• There hasn’t been anything in the way of idiosyncratic news flow to catch the eye in recent days.
• The local docket is empty in the time between Christmas and the New Year, which will leave broader macro headlines and spill over from wider cross-market flows at the fore in the coming days.
• Meanwhile, expect volumes and general liquidity to be limited as many participants will take time off between Christmas and NY.