Futures A Touch Softer On The Day, Back From Lows, Event Risk Eyed

A very mundane round of recent trade in Aussie bond futures sees ranges tighten, with that dynamic aided by the combination of a lack of headline news flow and holidays across Hong Kong, China & the UK. YM -1.0 & XM -2.0 at typing as a result, with wider cash ACGB trade seeing 30s cheapen by ~3bp. Bills run 2-7bp cheaper through the reds, while 3- & 10-Year EFPS are over 1bp wider on the session.

• Event risk will also be feeding into the lacklustre price action observed over the last few hours. Firstly, U.S. NFPs will hit in the overnight session. A little further out, focus will move to the latest RBA decision, due to take place on Tuesday. Note that the BBG consensus looks for a 40bp hike to 0.75%, although there is a degree of debate as to whether we will see a “business as usual” 25bp move (we will flesh this out in more detail in our full preview of the event, which is set to hit on Monday). When it comes to market pricing, the IB strip currently prices in ~35bp of tightening come the end of the Bank’s June meeting (which equates to a 2/3 chance of 40bp hike).
• Note that momentum seemingly helped YM & XM through their respective overnight lows in early Sydney trade, further aided by EFP & swap spread widening. That was before a modest uptick from session cheaps in U.S. Tsys allowed the space to stabilise.
• Softer than expected housing finance data provide the latest signal re: a cooling Australia property market, although there wasn’t anything in the way of meaningful market reaction post-data.
• There was also no reaction to the AOFM’s weekly issuance slate, which contained an uptick in Note issuance and a barbell approach (ACGB Sep-26 & ACGB Jun-51) when it comes to the ACGBs selected for auction next week.