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AUSSIE BONDS: Richer, Most Confident Of An RBA Cut Since Mar-2020

AUSSIE BONDS
BulletAPACFixed Income BulletsAustraliaMarkets

ACGBs (YM +3.0 & XM +5.5) are richer and near Sydney session highs.

  • “The Australian economy has so far tracked the RBA’s narrow path to a soft landing, but we expect below-potential growth, sticky inflation, and global trade shocks to complicate the final descent,” said Nick Stenner, who worked at the RBA until 2024 and is now at BofA in Sydney.
  • Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after yesterday’s strong session. After yesterday’s stronger-than-expected ADP employment in January, the focus has turned to Friday's headline employment data.
  • Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at -12bps.
  • Swap rates are lower with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing flat to +3.
  • RBA-dated OIS pricing is flat to 2bps softer across meetings today. A 25bp rate cut is more than fully priced for April (135%), with the probability of a February cut at 91% (based on an effective cash rate of 4.34%).
  • The last time the market was this confident about a rate cut was in March 2020, when expectations proved correct—the RBA cut rates twice that month, once at the scheduled meeting and again on the 20th.
  • Tomorrow, the local calendar will see Foreign Reserves data. 
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ACGBs (YM +3.0 & XM +5.5) are richer and near Sydney session highs.

  • “The Australian economy has so far tracked the RBA’s narrow path to a soft landing, but we expect below-potential growth, sticky inflation, and global trade shocks to complicate the final descent,” said Nick Stenner, who worked at the RBA until 2024 and is now at BofA in Sydney.
  • Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after yesterday’s strong session. After yesterday’s stronger-than-expected ADP employment in January, the focus has turned to Friday's headline employment data.
  • Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at -12bps.
  • Swap rates are lower with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing flat to +3.
  • RBA-dated OIS pricing is flat to 2bps softer across meetings today. A 25bp rate cut is more than fully priced for April (135%), with the probability of a February cut at 91% (based on an effective cash rate of 4.34%).
  • The last time the market was this confident about a rate cut was in March 2020, when expectations proved correct—the RBA cut rates twice that month, once at the scheduled meeting and again on the 20th.
  • Tomorrow, the local calendar will see Foreign Reserves data.