Cheaper, Narrow Ranges, Tracking US Tsys As Haven Bid Fades

ACGBs (YM -8.0 & XM -8.0) are cheaper after dealing in relatively narrow ranges in today’s Sydney session. With the domestic calendar empty, local participants have taken their directional lead from US tsys. In today’s Asia-Pac session, cash US tsys are 2-4bps cheaper.

• The latest round of ACGB Sep-26 supply prints through prevailing mids, extending the recent trend of firm pricing at ACGB auctions. It's noteworthy that the cover ratio saw a noticeable decline. It's essential to recognise, however, that the outright yield was 30-35bps lower than the level in October 2023.
• Optimism regarding the RBA's policy outlook, coupled with the bond's inclusion in the YM basket, likely bolstered demand at today’s auction. However, the looming release of Q1 CPI figures on Wednesday probably exerted a counterbalancing influence.
• Cash ACGBs are 7-8bps cheaper, with the AU-US 10-year yield differential 1bp lower at -33bps, hovering near a cycle low.
• Swap rates are 6-7bps higher.
• The bills strip has bear-steepened, with pricing -1 to -9.
• RBA-dated OIS pricing is 1-7bps firmer for meetings beyond June, with mid-2025 leading. A cumulative 18bps of easing is priced by year-end.
• Tomorrow, the local calendar sees Judo Bank PMIs, ahead of Q1 CPI on Wednesday.