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Early Yield Gains Not Sustained, AU-US 10yr Spread Sits At Multi-Month Lows

AUSSIE BONDS

Back end Aussie bond yields sit comfortably off earlier highs. The 10yr last tracked at 4.15% (against an earlier high of near 4.215%. This keeps us comfortably within ranges for Feb for the 10yr yield. The shorter end has proven to be stickier from a yield standpoint, with the 2 and 3 yr holding +1bps firmer, albeit down from earlier highs.

  • This is similar trends to NZ and leaves the yield curve flatter. In the futures space, XM sit +.02, well up from earlier lows. YM is still softer at -.02.
  • Support has been evident from firmer US TSYs. The AU-US 10yr spread sits at -15bps, fresh lows back to late Oct last year.
  • On the macro front, Governor Bullock has emphasised to the Treasurer that the continuity between the old and new monetary policy boards is extremely important and he assured her that he understands and will provide continuity when making the appointments (this was before a Senate hearing).
  • On the data front, Australia’s Judo Bank preliminary composite PMI for February returned to growth territory driven by the services sector. It came in at 51.8 up from 49.0 in January with services recovering to 52.8 from 49.1. Manufacturing activity contracted at 47.7 down from 50.1. Composite selling prices picked up in Q1 2024 after easing in Q4 2023, signalling that early 2024 inflation may look more persistent around 4-5%, according to Judo Bank, suggesting RBA easing is some way off.
  • The data calendar is empty tomorrow.

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