Off Best Levels Into The Close

Aussie bond futures finished off of best levels after respecting their overnight peaks, leaving YM +6.0 & XM +3.0. The major benchmarks were 6bp richer to flat, as the curve bull steepened.

• The overnight session/early Sydney richening was a product of spill over surrounding the latest FOMC decision.
• The pullback from best levels lacked much in the way of an overt explainer.
• EFPs narrowed on the day, suggesting that receiver-side flows in swaps aided the general bid in bonds, while the pull away from best levels was driven by bonds.
• Bills finished 3-10bp richer across the curve, as the strip flattened. RBA dated OIS continued to show just under 25bp of tightening for next week’s meeting, while terminal cash rate pricing oscillated either side of 3.70%, ticking lower on the day as the impulse from post-FOMC gyrations in the wider FI space was felt. Note that some sell-side names have flagged a non-trivial chance of a larger than 25bp step at next week’s meeting, in lieu of the firmer than expected Q4 CPI data received last week.
• Looking ahead, tomorrow will see the release of housing finance data and A$500mn of ACGB Apr-29 supply.