Curve Twist Flattens Ahead Of Employment Data Tomorrow

ACGBs close at or near session bests (YMM3 -3.2 & XMM3 -5.7) largely following the direction of U.S. Tsys as the cash curve twist flattened in Asia-Pac trade. Cash ACGB curve also twist flattened with the 3-year benchmark 3bp cheaper and the 10-year 2bp richer. Some leakage from NZGB cheapening on current account deficit and bond rating concerns was also likely at play. AU/US 10-year yield differential narrowed 11bp to -23bp.

• Swaps closed with rates +1bp to -2bp with the 3s10s curve 3bp flatter and the 3/10 EFP box flatter.
• Bills strip twist flattened with pricing +2 to -10bp.
• RBA dated OIS softened 5-16bp across meetings with April returning to pricing a tightening, albeit small (15% chance of a 25bp hike).
• After focusing on developments abroad for much of the week, February’s Employment Report is slated for release tomorrow. After two consecutive monthly declines the market is looking for a strong result (BBG consensus +50k) to defuse expectations of labour market stagnation. Complicating matters is the larger-than-normal number of people who indicated that they had a job to go to in the January report.
• Until then, the market will likely keep an eye on U.S. Tsys through the release of U.S. PPI and Retail Sales data.