Continued Repricing Of RBA Terminal Pricing Helps Space Lower

Aussie bonds weaken more than their U.S. Tsy counterparts, leaving the AU/U.S. 10-Year yield spread near the +5bp mark. Cash ACGBs are 5-7bp higher in yield terms, with the 7- to 12-Year zone lagging when it comes to the broader weakness on the curve.

• Short end flow is probably aiding the move, with terminal rate pricing on the RBA-dated OIS strip showing back above the 4.00% mark as participants continue to adjust to the latest post-meeting RBA statement.
• Local headline flow has been limited, outside of the previously covered BBG report which noted that “the first Australian coal shipment to China in more than two years is on the verge of docking.”
• Hedging surrounding the pricing of A$1bn of new SAFA-38 paper would have applied some pressure, but that passed a few hours ago, so isn’t the source of the recent downtick. Elsewhere, we note there may be some background pressure on reports that Virgin Australia is considering taking on new debt ahead of its potential IPO.