CBA: Buy ACGB 3.25% Apr 2029 vs. OIS

CBA note that "as ACGB yields start to fall again in anticipation of the RBA buying bonds via either an extended yield curve control (YCC) process or via QE, one of the measures of value we have flagged has been the spread to OIS. We note the previously wide relationship between OIS and ACGB yields and how that has compressed the 'credit spread'. With reduced bond issuance from the AOFM now taking place, ACGBs should start to compress on a spread. The obvious place to look for value is in the 5‑10Y sector of the ACGB market where any potential buying could come from the RBA. The ACGB Apr‑29 was a bond the RBA purchased in its original YCC program, where it bought $A4.6bn or, just over 14% of the outstanding amount. It currently trades at a spread of 10.7bp over OIS, while a bond 11 months shorter (the May‑28 is at 8.7bp). The curve rolls further from here, so the rolldown of this trade is positive. We enter this trade at 10.5bp, with a target of 3bp and a stop of 14bp. The ACGB Apr‑29 has carry and roll of 1.3bp per month."