Front End Leads The Early Sydney Bid

Futures have twist steepened since Tuesday’s settlement, leaving YM +3.5 and XM -1.5. The contracts cheapened overnight, tracking the broader trend in U.S. Tsys, although a bid has been seen since the Sydney re-open.

• With 3s leading the bid, we would suggest that the well-documented ACGB collateral shortage may be continuing to influence price action (~A6.5bn of ACGBs is currently being borrowed via the RBA’s SLF, with a cumulative ~A$5.4bn of the borrowing covering ACGB Nov-24, Apr-25 & Nov-25 i.e. the YM basket bonds).
• Westpac leading index data headlines the domestic docket on Wednesday. Elsewhere, the COVID-related cabinet meeting we had flagged for Tuesday (on the back of various press reports) will seemingly take place today. Note that PM Morrison has already played down worries that fresh lockdowns could be in the offing.