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Cheaper, Mid-Range, Retail Sales & Bldg Apps Tomorrow

AUSSIE BONDS

ACGBs (YM -4.0 & XM -3.5) are cheaper but off Sydney session cheaps. With the domestic calendar light, trading ranges have been relatively narrow. Considering that, local participants have likely used dealings in US tsy futures in today’s Asia-Pac session for directional guidance.

  • US tsy futures are dealing at 111-17+, -0-05+ compared to NY closing levels on Friday. Cash US tsys have not traded in today’s Asia-Pac session due to Japan being out for a public holiday.
  • Cash ACGBs are 3bps cheaper, with the AU-US 10-year yield differential unchanged at +12bps. A simple regression of the AU-US cash 10-year yield differential against the AU-US 1Y3M swap differential over the current tightening cycle indicates that the 10-year yield differential is currently 15bps too low versus its fair value (i.e., +13bp versus +28bp). (See link)
  • Swap rates are 3-4bps higher.
  • The bills strip is cheaper, with pricing -1 to -4.
  • RBA-dated OIS pricing is flat to 5bps firmer across meetings out to December. A cumulative 42bps of easing is priced for 2024.
  • Tomorrow, the local calendar sees Retail Sales and Building Approvals. Tokyo CPI is also due in Japan.
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