Longs Squeezed, RBNZ Adds To Pressure

Trans-Tasman matters, namely the RBNZ decision and communique (which saw an unwinding of OIS pricing re: negative rates in 2021), added fresh weight to a space that had been biased lower ahead of the RBNZ decision, squeezing already long positioning. YM -1.5, XM -7.5 come the close, with the latter threatening to break through the 1.00% implied yield level after a brief look through. A reminder that XM traders have used this price zone to build longs in recent times, but the already long positioning may limit such a dynamic this time around.

• Pre-RBNZ trade saw participants push the space lower after the RBA failed to step in with off schedule ACGB purchases to reinforce its 3-Year ACGB yield target on the latest uptick in yields, after it chose to do so earlier this week. The RBA did buy A$1.0bn of semis as scheduled.
• Elsewhere, the cover ratio seen at the latest ACGB Nov '31 auction was firm enough, nudging above 4.00x, although pricing wasn't as firm as some of the recent ACGB offerings, with the average yield stopping ~0.4bp through prevailing mids at the time of supply, per BBG pricing (the recent sell off in the space may have weighed on general bidding). Still, all in all, the auction was digested smoothly enough.