Post-RBA Cheapening Extends

Aussie bond futures extended on their initial post-RBA cheapening overnight, with the major contracts operating around their post-Sydney session base after some two-way price action in NY dealing (centring on Fed Chair Powell’s latest comments and a soft 3-Year Tsy auction out of the U.S.). That leaves YM -5.0 & XM -6.0, while wider cash ACGB trade sees 4.5-6.5bp of cheapening, with a light steepening bias apparent. Bills run 2-5bp cheaper through the reds, while RBA-dated OIS is showing ~20bp of tightening for next month’s meeting, alongside a terminal cash rate of just over 3.95%.

• Late Tuesday we saw some of the more dovish RBA calls from the sell-side adjusted to incorporate the RBA’s signal that more than 1 further hike is in the pipeline. WSJ watcher Glyn noted that “the Australian central bank could well be on track to soon take the benchmark rate to a peak beyond 4.0% before it is done.”
• Comments from Treasurer Chalmers have gone over old ground, pointing to notable economic headwinds, albeit with no expectations for a recession in Australia.
• There isn’t much in the way of meaningful local or macro risk events slated for Wednesday’s session, outside of A$1bn of ACGB Nov-33 supply, which will leave participants on headline watch.