Close To Neutral After Offshore Matters Push The Space Around

Offshore matters were in the driving seat on Monday, with trans-Tasman spill over from a rally in NZGBs (see earlier bullets for more detail on that matter) allowing Aussie bond futures to more than unwind losses witnessed during the final overnight session of last week.

• The space then corrected from best levels as U.S. Tsys came under some early pressure, before softer than expected official PMI data out of China and a move away from session lows for U.S. Tsys allowed the space to stabilise during the Sydney afternoon.
• Virtually in line with expected local data had no impact on the space.
• That leaves YM -1.0 & XM -2.0 at the bell, while wider cash ACGB trade sees 1-2bp of cheapening across the curve, with a lack of month-end index extension demand evident (in line with the sub-average nature of most desk estimates).
• 3- & 10-Year EFPS were a little over 3bp wider on the day, while Bills finished flat to 7bp cheaper through the reds, steepening.
• Looking ahead, the latest RBA monetary policy decision headlines on Tuesday, with a 25bp rate hike widely expected and ~30bp of tightening priced into the OIS strip. See our full preview of that event here: https://roar-assets-auto.rbl.ms/documents/19945/RBA%20Preview%20-%20November%202022.pdf