Drifts Cheaper With US Tsy Futures, Germany Avoids Technical Recession

ACGBs (YM -4.0 & XM -5.0) are cheaper after following US tsy futures lower on Monday. Cash US tsys were closed on Monday for observance of the Martin Luther King public holiday.

• With US markets closed, the focus was on German economic data. The Euro area’s economic powerhouse continued to underwhelm, with the preliminary estimate of Germany's GDP showing a 0.3% contraction in Q4. Q3 was revised up a tick to 0%, thus avoiding two negative quarters in a row. Nevertheless, the economy contracted 0.3% y/y.
• Cash ACGBs are 3-4bps cheaper.
• Swap rates are 3-5bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -4.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings, with December leading. A cumulative easing of 49bps is priced for year-end.
• Today, the local calendar sees Westpac Consumer Confidence.
• TCV yesterday launched a new A$-denominated Sep-38 fixed-rate benchmark bond. Bond initial price guidance of EFP+115-119bps, equating to ACGB 3.75% 21 Apr-37 +103.4-107.4bps. Pricing is expected to take place today.