Bonds Give Back Part Of Post-Jobs Rally

Australian rates futures contracts retrace a significant part of yesterday’s post-employment data surge as U.S Tsy yields push higher with initial jobless claims and PPI data suggesting the Fed has more work to do. A message that was reinforced later in the day when StL. Fed President Bullard stated that he wouldn’t rule out a move back to 50bp hikes at the March meeting. Cash ACGBs open 4-6bp higher in yields with 15-20-year zone leading.

• Cash curve is little changed, but the AU-US 10-year yield differential is 2bp tighter at ~-4bp.
• Swap open weaker with rates 4-5bp higher and the 3s10s curve 1bp steeper.
• Bills are 2-4bp lower across the strip with the reds weakest.
• March meeting RBA-dated OIS opens around yesterday’s close with an 88% chance of a 25bp hike priced. Terminal rate expectations (Sep/Oct-22) however moved 2bp higher to 4.15%, the mid-point of its recent 4.10%-4.22% range.
• With no local data today and RBA Governor Lowe’s appearance before the House of Representatives Standing Committee on Economics so far not generating any market moves, markets will continue to be guided by developments abroad, particularly with global central bankers continuing to talk hawkishly and U.S Tsy 10-year approaching crucial technical levels.
• The AOFM will today sell A$500mn of the 4.25% 21 April 2026 bond, as well as releasing its weekly issuance slate.