RBA Looks To Enforce ACGB Apr-24 Yield Target

Futures twist steepened overnight, leaving YM +3.5 and XM -2.5 come the end of post-Sydney dealing.

• Late on Tuesday the RBA noted that it is "is currently accepting requests to borrow the Apr-23 and Apr-24 bonds via its own facility only. The indicative fee to borrow these bonds is currently 100 bps, subject to change." This will disincentivise shorts of the respective lines as the RBA looks to shore up its yield curve targeting mechanism given the moves seen in recent days (ACGB Apr-24 closed Tuesday trade at 0.1525% vs. a target of 0.10%. Note that it printed as high as 0.1725% on Tuesday, before the RBA deployed the aforementioned restrictions). ACGB Apr-24 had a much more notable short base when this measure was deployed with success earlier in '21, which resulted in a more pronounced initial move. The move contributed to the twist steepening of futures in overnight trade, as did the twist steepening dynamic in U.S. Tsys, although ACGB Apr-24 does not form part of the YM basket this time around. YMZ1 still prints the best part of 50bp cheaper than it did at the end of September.
• Wednesday's local docket will be headlined by the latest round of leading index data from Westpac, in addition to this week's sole round of AOFM ACGB issuance, in the form of A$1.5bn of ACGB Apr-33.