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Cheaper With US Tsys, OIS Has ~50bps Of Additional RBA Tightening Priced

AUSSIE BONDS

ACGBs (YM -4.0 & XM -8.0) are weaker after US tsys finished the NY session with yields 3-6bps higher. US tsys were pressured through the NY session on supply concerns and an improvement in risk appetite.

  • The US Treasury expects to borrow $776bn in Q4 and an additional $816bn in Q1 2024. Both estimates would represent records for each respective quarter. However, the Q4 estimate was $76bn less than previously announced in July, due to projections of higher receipts.
  • Risk appetite began the week on a positive note, with the market taking a sanguine view of indications that Israel was taking a less expansive approach to the invasion of Gaza. Wall Street finished up greater than 1%, while oil dropped ~4%.
  • Cash ACGBs are 4-8bps cheaper, with the AU-US 10-year yield differential 5bps wider at +6bps.
  • Swap rates are 4-7bps higher, with the 3s10s curve steeper and EFPs 1bp tighter.
  • The bills strip has bear-steepened, with pricing flat to -4.
  • RBA-dated OIS pricing is flat across meetings out to Mar’24 and 2-4bps firmer beyond. Terminal rate expectations jump 3bps to 4.55% (+48bps by Aug’24).
  • Today, the local calendar sees Private Sector Credit data, ahead of CoreLogic House Prices and Judo Bank PMIs tomorrow.
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