Richer, Major Banks Survive APRA Stress Tests

ACGBs (YM +3.0 & XM +6.5) are richer but near Sydney session cheaps after October Consumer Inflation Expectations lift to 4.8% from 4.6% previously.

• Cash ACGBs are 3-7bps, with the AU-US 10-year yield differential 2bp higher at -20bps.
• Swap rates are 1-6bps lower, with the 3s10s curve flatter and EFPs 1bp wider.
• Bills strip pricing is mixed, -1 to +2.
• RBA-dated OIS pricing is flat to 1bp softer across meetings. Terminal rate expectations sit at 4.19%.
• Bloomberg reports that “Australia’s banking regulator said the ramp up in interest rates that’s caused pockets of stress in the nation’s housing market isn’t becoming more widespread.” (See link)
• (AFR) The major banks have survived the stress tests imposed by the prudential regulator, underscoring the strength of the banking system in a hard landing scenario of 10 per cent unemployment, high inflation, and a one-third drop in house prices. (See link)