Flatter, All Things China In The Driving Seat

Aussie bond futures were better bid than their U.S. counterparts during early Sydney dealing, even as wider risk assets benefitted from the latest supportive steps drawn up for the Chinese property market (analysts have questioned the impact that the move will have) & confirmation that Shanghai will start (gradually) easing COVID restrictions from today. That was before the wider, China- inspired defensive flows provided some fresh support for the space, with the longer end leading the bid.

• The pace has since eased back from best levels, akin to the move in U.S. Tsys, leaving YM +0.5 & XM +4.0 at typing. Cash ACGB trade sees 30s outperform, richening by ~5bp as of typing.
• The 3-/10-Year EFP box has twist flattened on the day.
• Note that the IR strip has also seen some twist flattening, with contracts running -1 to +3 through the reds. 3-month BBSW set ~3bp higher today, which helped the front end underperform.
• While the ruling coalition’s property policy proposals garnered plenty of headline interest they weren’t seen as a meaningful driver for the ACGB space. A quick reminder that the ruling coalition trailed the opposition Labor Party in the most recent opinion polls, with the Federal election set to take place on 21 May.
• Looking ahead, the minutes of the RBA’s most recent monetary policy decision are set to headline domestic matters on Tuesday. They will be combed for any guidance re: the future path of tightening after the RBA surprised markets with a 25bp hike in May, although the deluge of communique that dropped around and after the May decision may limit the scope for surprise.