RBA Tweaks Borrowing Costs Of YCC Lines On Short Squeeze

{AU} AUSSIE BONDS: YM unchanged with XM +1.0 in Sydney.

• There were no surprises provided in the release of the RBA's latest SoMP given the guidance already seen earlier this week.
• The A$800mn auction of ACGB Nov '24 went well, with the cover ratio moving higher vs. the prev round of supply for the line, while the weighted average yield printed 0.74bp through prevailing mids at the time of supply (per Yieldbroker pricing).
• There were some interesting swings in ACGB Apr '24 (the bond targeted by the RBA under its 3-Year yield targeting mechanism), which forms part of the YMM1 basket. The line traded as low as 0.055% in yield terms (comfortably through the Bank's 0.10% target) before backing off to trade at 0.09% at typing. Shorts in the line were squeezed in the early goings as they seemingly looked to secure bonds for settlement of existing positions. The retracement came as the RBA noted that it "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 25 bps, subject to change." Back in March the RBA lifted the cost of borrowing of these lines to 100bp, as it looked to limit short selling that was testing the implementation of its 3-Year yield targeting mechanism.
• The weekly RBA issuance slate was vanilla.
• The latest NAB business survey, March retail sales data & Q1 retail sales volume data all hit on Monday. Monday will also bring A$1.0bn of ACGB 1.00% 21 December 2030 supply.