CBA Don't Expect Futures Rolls To Move Far From Current Value

Looking to the bond futures rolls, CBA note that "the repo market is currently showing a number of bonds in the 3-Year zone as slightly special." But they do highlight that "the recent collapse of the cheapness of the futures has much more to do with the impending futures expiry than it does any change in the underlying market structure."

• "There are changes to both futures baskets this roll. The change to the 3-Year is the more consequential, with the Apr‑23 leaving the basket to be replaced by the Nov‑25. With the current unusual shape of the front end ‑ flat until the Apr‑24 ‑ the switch adds a lot to the average yield of the bonds in the basket (and so reduces the value of the futures). The 3-Year futures roll has a fair value of 16.28bp on our calculations. Given the backdrop of the bond market that doesn't seem unreasonable."
• "The 10-Year futures roll also has a different set of bonds, with the May‑30 being dropped from the basket but no bond added. This gives the futures roll a slight positive bias… we see a market price of 8.25bp."
• "It's early days, but at this point we wouldn't expect either future roll to move far from its current value. In our view, there's some scope for the 3-Year roll to increase, but not a great deal."