Bull Steepening Holds In Wake Of U.S. Data, Finish Off Best Levels

ACGBs held on to a relatively large chunk of the gains that were inspired by Friday’s U.S. data release, but still finished comfortably shy of best levels come the end of the first Sydney session of the week. This came alongside regional focus on the continued reopening drive in China and perhaps longs trimming exposure after a swift round of profit in early ’23 allowed the space to pullback from best levels. Major bond futures contracts failed to force a meaningful break through their respective overnight peaks.

• There was also a lack of meaningful, fresh cues from the wider core global FI space, with Japan out on holiday, leaving cash Tsys closed until London hours.
• That left YM +14.0 at the bell, while XM was +10.0. The major cash ACGB benchmarks were 5-14bp richer, with 3s outperforming all day against a bull steepening backdrop.
• RBA dated OIS came in a little, with 19bp of tightening priced for Feb’ 23, alongside a terminal cash rate of a little over 3.90%.
• When it came to local headline flow there was little to note, with the APRA confirming the as planned A$0 balance of the CLF as of the turn of the year, while Australia Treasurer Chalmers noted that he would aim to “put the budget on a more sustainable footing.”
• Much softer than expected domestic building approvals data failed to impact the space.
• Tomorrow’s local docket is empty.