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Local Rally Continues As Global Bonds Richen

AUSSIE BONDS

ACGBs (YM +4.0 & XM +7.0) are stronger after US Tsys rallied 6-11bps across benchmarks, with the 7-10-year zone leading. Central bank easing expectations drove the rally in global bonds yesterday, with the BoJ’s Summary of Opinions showing no indication of an exit from negative rates. That positive lead-in for the NY session was further supported by the Richmond Fed Mfg Index (-11 vs. -3 est, -5 prior) and Business Conditions (0.0 vs. -9 prior), which printed the lowest reading since April. A decent $58bn 5Y sale, which traded through (3.801% high yield vs. 3.812% WI, 2.50x bid-to-cover), also added support.

  • Projected rate cuts for early 2024 gained momentum: March 2024 has fully priced in a full 25bp cut, with a cumulative -54bps by May 2024 and -167bps by December 2024.
  • Cash ACGBs are 5-7bps richer, with the AU-US 10-year yield differential 2bps wider at +11bps.
  • Swap rates are 4-7bps lower, with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing +1 to +7.
  • RBA-dated OIS pricing is 2-4bps softer across meetings beyond Mar’24. 67bps of easing is priced by Nov’24.
  • Today, the local calendar is empty.
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