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Richer But Off Best Levels, US Tsys and JGBs Weigh

AUSSIE BONDS

ACGBs (YM +2.0 & XM +5.0) have sustained their strength following the positive performance by US tsys in yesterday’s NY session. However, they are currently trading 2-3 bps below the best levels observed during the Sydney session. In the absence of significant domestic data releases, local market participants have adjusted their positions to align with the slight cheapening of US tsys in today's Asia-Pacific session.

  • US tsys are presently trading 1-2 bps cheaper, reversing some of the 5-11 bps rally seen across benchmarks in yesterday's session. It's worth noting that the rally in JGBs yesterday, prompted by the BoJ's Summary of Opinions for the December Monetary Policy Meeting, contributed to the positive momentum in global bonds. However, today's weakness can be partially attributed to the sell-off in longer-dated JGBs following unexpectedly robust activity data.
  • Cash ACGBs are 3-5 bps richer, with the AU-US 10-year yield differential 2 bps wider at +11 bps.
  • Swap rates are 2-5 bps lower, with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing flat to +3.
  • RBA-dated OIS pricing is 1-3 bps softer across meetings beyond Mar’24. 65bps of easing is priced by Nov’24.
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