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Reverse Direction With Weaker U.S Tsys

AUSSIE BONDS

After an initial spike higher with the release of RBA Governor Lowe’s speech this morning, ACGBs quickly reversed and then cheapened over the session to close near lows (YM -9.0 and XM -6.0). With Lowe clarifying yesterday’s dovish message, that a pause as soon as April is possible (offering little new), ACGBs turned to U.S Tsys for direction. Cash ACGBs weakened 5-8bp with the 3/10 cash curve 2bp flatter.

  • The 3s10s swaps curve bear flattened with rates 4-6bp higher and EFPs 1-2bp tighter.
  • Bills closed 2-7bp cheaper, steepening.
  • After yesterday’s aggressive RBA-induced softening, RBA-dated OIS firmed +3-6bp for meetings beyond June with terminal rate pricing pushing back out to 4.07% versus yesterday’s of ~4%. The strip took the lead from Tuesday's repricing of FOMC expectations.
  • Futures roll activity will pick up from the overnight session, with tick sizes shrinking ahead of next week's expiry.
  • With the local calendar light for the remainder of the week, the market will be guided by developments abroad. Later today we hear from Fed Chair Powell when he testifies before the House. The BOC is also scheduled to deliver a policy decision. With the RBA now openly discussing a policy pause, the market will be keen to see if the BOC carries through with its no-change guidance today.

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