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Bucking The Trend, Likely Weighed By Cross Market Flows

AUSSIE BONDS

Thursday’s weakness in ACGBs was somewhat peculiar, given the general core FI richening theme and a lack of idiosyncratic news flow.

  • This (once again) leads us to conclude that cross-market flows were at the fore, with the AU/U.S. 10-Year yield spread resuming its recent widening, hitting the widest level seen since October, perhaps aided by some exits from crowded compression trade positioning in that spread. AU/NZ cross-market flows may also have been at work, given the relative resilience in NZGBs and movement in AUD/NZD.
  • That left YM -6.0 and XM -7.0 at the close, while the wider cash ACGB benchmarks were 4.5-8.0bp cheaper, with bear steepening in play.
  • Swap flow seemed to aid the general trajectory, with EFPs a little wider on the day. This came as the Bill curve ran steeper, finishing 1-11bp cheaper through the reds. Meanwhile terminal cash rate pricing in the RBA dated OIS strip nudged higher, finishing a little shy of 3.80%, aiding the cheapening & swap paying dynamics.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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