Richer After Employment Report Despite A Lower UE Rate

ACGBs (YM -4.0 & XM -8.0) are 2-3bps richer, reversing the initial slight cheapening seen after the September employment report delivered a drop in the unemployment rate to 3.6%. The market had expected an unchanged rate of 3.7%. The employment change was lower than expected at +6.7k versus an estimate of +20k and +63.3k previously.

• Cash ACGBs are 2-3bps richer post-data but remain 3-8bps cheaper on the day. The 3/10 curve remains steeper and the AU-US 10-year yield differential is 2bp lower at -20bps.
• Swap rates are 3-7bps higher on the day, but 2-3bps lower in post-data dealings. EFPs remain tighter.
• The bills strip reversed its bear-steepening after the data, with pricing flat to +2.
• RBA-dated OIS pricing is little changed across meetings after the data. The chance of a 25bp hike at the November meeting remains at 43%.
• QTC has priced a new A$2 billion 5.25% 21 July 2036 A$ Fixed Rate Benchmark Bond, according to ANZ. The transaction has a re-offer yield of 5.58%, a clean re-offer price of 97.011% with 1.384% accrued interest and a re-offer spread of 80bps over the 10-year futures contract, equating to 67.25bps over the ACGB 3.75% 21 April 2037. The Bonds are Rule 144A eligible.