Rallying From Lows

Futures have retraced from their respective early Sydney gaps lower, leaving YM +2.0 and XM +2.5 at typing, with the bulk of the overnight flattening unwound in futures (a reminder that the overnight move was bear flattening, as opposed to bull flattening). YM failed to get anywhere near testing its overnight lows during the re-open gap lower, while XM briefly threated to break its post-Sydney low. Cash ACGB trade has seen some twist flattening relative to settlement levels, with the longer end of the cash curve running ~4.5bp richer on the day, while 1s and 2s are cheaper than closing levels.

• There is plenty of talk of the market getting ahead of RBA forward guidance and speculation surrounding the potential need for the RBA to step in to maintain, or even alter its yield curve targeting mechanism.
• A reminder that the minutes from the RBA's October meeting are due to be released later today. This is expected to be a bit of a non-event, with the Bank's forward guidance and glass half full view set to form the focal point of the underlying message.