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Richer & At Highs, BoJ Decision Adds Support

AUSSIE BONDS

ACGBs (YM +4.0 & XM +3.5) are richer and at Sydney session highs after business conditions eased in the final month of last year and confidence remained at below-average levels.

  • The key driver of global bonds in today’s Asia-Pac session however was the BoJ Policy Decision. As largely expected, the BoJ delivered no changes in policy, forward guidance or its explicit easing bias. There were also no signals regarding the termination of the Negative Interest Rate Policy (NIRP). Long-end JGB yields gapped lower on the decision but that move has largely been unwound.
  • US tsys are dealing ~1bp richer on the day after being largely unchanged in pre-BoJ trade.
  • Cash ACGBs are 4-5bps richer, with the AU-US 10-year yield differential 1bp tighter at +10bps.
  • Swap rates are 5-6bps lower.
  • The bills strip is flat to +5, with the reds leading.
  • RBA-dated OIS pricing is flat to 4bps softer across meetings, with Sep-Dec leading. A cumulative 40bps of easing is priced by year-end.
  • Tomorrow, the local calendar sees Judo Bank PMIs (P) and the Westpac Leading Index.
  • Tomorrow, the AOFM plans to sell A$800mn of the 3% November 2033 bond.

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