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AUSSIE BONDS: Richer But Off Bests, RBA Decision On Tuesday With At 85% Priced

AUSSIE BONDS
BulletAPACFixed Income BulletsAustraliaMarkets

ACGBs (YM +4.0 & XM +6.0) sit stronger but off the session’s best levels on a local data-light session.

  • Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at -11bps.
  • Swap rates are 3-5bps lower, with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing +1 to +5.
  • “The Reserve Bank of Australia is on track to lower interest rates for the first time in the current global easing cycle, but the outcome of next week's policy meeting is more finely balanced than what is implied by pricing in money markets, according to Jonathan Kearns, a former senior manager at the central bank.” (per DJ via BBG)
  • Reuters Poll shows 40 out of 43 economists expect the RBA to cut the cash rate to 4.10% on February 18, while three predict no change.
  • RBA-dated OIS pricing is flat to 3bps softer across meetings today. A 25bp rate cut is more than fully priced for April (119%), with the probability of a February cut at 84% (based on an effective cash rate of 4.34%).
  • The local calendar is empty until the RBA Policy Decision next Tuesday.
  • Next week, AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday. 
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ACGBs (YM +4.0 & XM +6.0) sit stronger but off the session’s best levels on a local data-light session.

  • Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at -11bps.
  • Swap rates are 3-5bps lower, with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing +1 to +5.
  • “The Reserve Bank of Australia is on track to lower interest rates for the first time in the current global easing cycle, but the outcome of next week's policy meeting is more finely balanced than what is implied by pricing in money markets, according to Jonathan Kearns, a former senior manager at the central bank.” (per DJ via BBG)
  • Reuters Poll shows 40 out of 43 economists expect the RBA to cut the cash rate to 4.10% on February 18, while three predict no change.
  • RBA-dated OIS pricing is flat to 3bps softer across meetings today. A 25bp rate cut is more than fully priced for April (119%), with the probability of a February cut at 84% (based on an effective cash rate of 4.34%).
  • The local calendar is empty until the RBA Policy Decision next Tuesday.
  • Next week, AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday.