Cheaper, Tepid Demand At Weekly Auction

ACGBs (YM -3.0 & XM -1.0) are holding a bear-flattening in a data light session.

• Earlier, today’s auction of Jun-35 bonds showed relatively tepid demand with the cover ratio being a modest 2.2125x versus 2.925x in May and 2.8438x in March.
• As highlighted in our preview, today's bid may have been affected by a relatively low outright yield, 15-20bps lower than the May 15 auction and about 80bps below the cycle high of 5.01%. Additionally, today's auction encountered the flattest 3/10 cash curve since September last year.
• The AOFM also plans to sell A$700mn of the 1.50% 21 June 2031 bond on Friday.
• US markets are shut today for the Juneteenth holiday.
• Cash ACGBs are flat to 1-2bps cheaper, with the AU-US 10-year yield differential at -6bps.
• Swap rates are 1bp higher to 1bp lower, with the 3s10s curve flatter.
• The bills strip has cheapened, with pricing -1 to -3.
• RBA-dated OIS pricing is 3-8bps firmer than pre-RBA levels. A cumulative 9bps of easing is priced by year-end.
• (Bloomberg) Australia’s central bank put the world on alert that it may buck global trends by raising interest rates again, with policymakers delivering what the bond market judged to be the most hawkish shock in a year. (See link)