Firmer, Front End Leads The Bid

Aussie bonds firmed on Friday. A weaker USD surrounding Chinese re-opening hopes was a primary driver for a bid in U.S. Tsys which supported ACGBs during the latter rounds of Sydney dealing.

• EFPs were narrower all day, with receiver side flows in swaps lending a helping hand to ACGBs during early trade. This saw EFPS edge a little further away from cycle wides after the recent surge wider.
• YM was +11.0 at the bell, with XM +7.0, building on the overnight bounce from post-Sydney lows, while wider cash ACGB trade saw 7.5-11bp of richening as the curve bull steepened.
• The space looked through the latest round of economic projections provided in the RBA’s SoMP (with the major releases already flagged in Bank’s post-meeting statement earlier in the week, as is the norm).
• Elsewhere, slightly softer than expected Q3 real retail sales data was accompanied by negative revisions to the Q2 print,
• Bills were 6-16bp richer through the reds, with the backend of the whites and front end of the reds outperforming. RBA dated OIS has come in a touch more, pointing to a terminal cash rate of just over 4.00%.
• Looking ahead, next week’s domestic highlights include an address from RBA Deputy Governor Bullock (Wednesday), CBA household consumption data, NAB business and Westpac consumer confidence surveys (all due Tuesday) & inflation expectations (Thursday). We will also get the syndication of the new ACGB May-34.