Off Best Levels But Comfortably Firmer

Aussie bonds have edged away from their extremes, having unwound a blip lower after Westpac’s Bill Evans revised guidance for the RBA’s terminal cash rate to 3.35% (prev. 2.60%), with the revised rate ultimately undershooting the rate of tightening priced into the market (IBs see a cash rate of ~3.40% by year end, per BBG WIRP). Cash ACGBs run 8.0-13.0bp richer across the curve, with the 7- to 12-Year zone leading the bid. YM and XM are +11.0 and +13.5, respectively, a little off best levels after bettering their respective overnight highs early on. Bills run 7 to 13 ticks richer through the reds, bull flattening.

• The latest round of ACGB Sep-26 supply went well, with the weighted average yield printing 1.65bp through prevailing mids (per Yieldbroker). The cover ratio ticked higher to 3.40x (albeit with a slightly smaller amount on offer), coming in above 3.00x and bettering the previous auction’s 3.28x, pointing to solid demand. The result builds on the recent strong run of shorter-dated ACGB auctions, supported by the stabilisation of Aussie bonds away from outright cycle cheaps.
• The AOFM issuance slate announced for next week will see a “reduced” A$1.3bn in ACGBs on offer (from the “usual” A$1.5bn), with the issuance of Notes moderating to A$2.0bn as well (from the “usual” A$2.5bn).
• Looking to next week, Monday will see A$300mn of the ACGB Mar-47 Bond on offer, while the domestic data docket is virtually empty, with Q2 CPI expected to provide the first point of interest on Wednesday.