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Richer But Pressured By JGBs Ahead Of RBA Decision Tomorrow

AUSSIE BONDS

ACGBs (YM +2.0 & XM +3.5) sit richer but near Sydney session lows as global yields see spillover selling from another session on weakness in JGBs. JGB yields are 4-10bp cheaper beyond the 5-year zone after the BoJ surprisingly tweaked yield curve control (YCC) on Friday. While maintaining the target of 0% +/- 50bp for the 10-year JGB, the BoJ announced that the 50bp was no longer rigid up to 1%.

  • US tsys are holding cheaper in today's Asia-Pac session with yields 3-4bps higher across the major benchmarks.
  • Cash ACGBs are 3-4bp richer with the AU-US 10-year yield differential -1bp at +4bp.
  • Swap rates are 2-3bp lower.
  • The bills strip has twist flattened with pricing -2 to +3.
  • RBA-dated OIS pricing is flat to 2bp firmer across meetings. The market attaches a 27% chance of a 25bp hike at tomorrow’s meeting. Terminal rate expectations currently sit at 4.33% versus 4.75% in early July.
  • Tomorrow the local calendar sees the RBA Policy Decision. Bloomberg consensus expects a 25bp hike to 4.35%, but the decision is generally seen as a line ball.
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