CBA Dive Into ACGB Relative Value

CBA look at their Nelson-Seigel analysis of the ACGB curve. They note that "the Apr '24 is the dearest of the bunch around the 3Y point, but there's also some unusual developments at the 10Y space. The 10Y area bonds are still on the dear side (they always are) but the Jun '31, May '32 and Apr '33 are all near the cheapest they've been in the last three months, while the 7-8Y part of the curve is much dearer than normal. Against the recent backdrop, we'd take these developments as a sign of health in the market. It shows that the extra liquidity of the 10Y bonds is no longer seen as being as massively valuable as it used to be – and was as recently as the last couple of months. The May '41 is the cheapest bond on the curve, with the two longer bonds looking much dearer. But that's only cheap against the fitted curve. We've seen in recent semi deals that the demand for 20Y and 30Y paper seems large, too. So although the May '41 is showing as cheap, we wouldn't expect it to richen any time soon."