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Richer, Narrow Range, Focus On Chair Powell's Testimony

AUSSIE BONDS

ACGBs sit richer (YM +6.0 & XM +6.5) but at session cheaps as overnight strength in US tsys is faded ahead of Fed Chairman Powell's semi-annual testimony to House Services Panel later today. Chair Powell is not expected to deviate from last week's policy messaging.

  • US tsys are holding cheaper through the Asia-Pac session, but ranges are narrow given the lack of meaningful news flow.
  • Cash ACGBs are 5-6bp richer on the day with the AU/US 10-year yield differential +1bp at +23bp, the highest level since September of last year. The 10-year differential had traded within a range of -30bp to +20bp since November. The recent shift in the 10-year yield differential can be attributed to the divergent expected rate paths of the US Fed and the RBA. (See link)
  • Swap rates are 5-6bp lower with EFPs slightly wider.
  • The bills strip bull steepens with pricing +2 to +4.
  • RBA-dated OIS pricing is 2-5bp softer across meetings with Feb’24 leading.
  • The local calendar is light tomorrow.
  • TCV has priced an A$2.75 billion increase to the 2.25% 20 November 2034 benchmark bond via syndication, taking outstanding volume to A$8.708bn. The bond priced with a re-offer spread of +95 basis points over the 10-year futures contract, equivalent to +90.5 basis points over the ACGB 3.5% 21 December 2034.
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