Front End Leads The Bid

The ACGB space has regained some poise after the early blip lower, with the front end of the curve leading the bid on day, aided by the front-end/belly driven nature of Thursday’s bid in EGBs & Tsys in the wake of the well-documented softer than exp. PMI readings out the U.S. & Eurozone. A related moderation in RBA tightening expectations has also aided the bull steepening dynamic.

• Note that the BBG WIRP function indicates that the IB strip is pricing in a cash rate of ~3.20% at the end of the Bank’s Dec meeting (vs. ~3.30% at the close of Sydney trade on Thursday).
• This leaves YM +17.5 & XM +14.5, although neither contract has managed a challenge of their respective overnight peak.
• Bills run 8-21bp richer through the reds, bull flattening.
• Note that the 15-/30-Year ACGB spread is flirting with inversion, with the 20-/30-Year spread already inverted.
• Next week’s AOFM issuance slate is light, with only A$600mn of ACGB Jun-51 on offer.