Cheaper, But Off Lows

Aussie bonds are off of session cheaps, as a light bid in U.S. Tsys has helped to pull the space back from session lows. The overnight cheapening in futures that stemmed from Thursday’s bear steepening in the Tsy space gained further momentum as YM & XM registered multi-week lows in early Sydney trade, before the aforementioned move away from worst levels. Cash ACGBs run 7.0-13.5bp cheaper across the curve, bear steepening. YM and XM are -8.5 and -12.0, respectively. Bills run flat to 9 ticks cheaper through the reds.

• The latest round of ACGB Sep-26 supply saw firm pricing, aided by the stabilisation away from cycle cheaps in Aussie bonds, with the weighted average yield printing 1.83bp through prevailing mids (per Yieldbroker). On the other hand, the cover ratio moderated to 2.66x from the previous auction’s 3.40x, coming in far below the six-auction average of 4.03x, with international investors still seemingly sidelined amidst lingering uncertainty re: the degree of tightening that will be executed by the RBA in the current cycle. The slightly higher DV01 on offer from the AOFM this week and the marginal richness of the line in micro-RV terms also provided headwinds, limiting demand at the auction.
• The release of the AOFM’s weekly issuance slate provoked little by way of meaningful reaction in Aussie bonds, seeing a smaller A$1.5bn of ACGBs (with a slight step down in the DV01 from this week’s supply) and A$2.5bn of note supply on offer next week.
• The domestic data docket is virtually empty on Monday, with minutes of the RBA’s Aug policy meeting and CBA household spending data expected to provide the first points of interest on Tuesday.