Cheaper, But Off Lows

Aussie bonds are off their extremes, back from session highs made after the surprise decline in headline employment figures within July’s domestic labour market report (-40.9K vs. BBG median +25.0K), but sitting comfortably cheaper on the day, with ACGBs unable to unwind the cheapening impetus derived from Wednesday’s weakness in wider core FI markets. ACGBs run 3.0-4.5bp cheaper across the curve, with 12s leading the way lower. YM is -3.5, operating around the middle of its range after a brief blip above its overnight high, while XM is -4.5, once again around the middle of its range. EFPs are mixed, with the 3-/10-Year box twist steepening, while Bills run flat to 7 ticks cheaper through the reds.

• Looking into the details, the labour market report contained several caveats (i.e. floods, school holidays, and COVID infections) as explanations for the miss in headline employment numbers, as well as sample rotation, helping to pull ACGBs back from their initial knee-jerk move higher.
• Friday will see A$700mn of ACGB Nov-27 supply before the release of the AOFM’s weekly issuance slate, while no economic data releases of note are scheduled.