Sharp Sell Off After Holiday, RBA Terminal Pricing Jumps

Aussie yields surged as domestic participants played catch up after Thursday’s holiday, with bearish pressure increasing on technical breaks in YM & XM futures, which allowed bears to switch focus to the June cycle lows in the respective contracts. YM -21.5 & XM -24.0 at typing.

• Yields run 21-27bp higher across the curve, with the 3- to 5-Year sector leading the weakness.
• The 3-/10-Year EFP box has flattened, with 3-Year EFP the best part of 5bp wider and 10-Year EFP little changed.
• Bills run 5-26bp lower through the reds, steepening.
• RBA dated OIS sees a bit of a reluctance to price much more into the Oct meeting (last ~44bp), given the Bank’s reference to a need to slow the pace of hikes at some point and pre-meeting outline of discussions surrounding 25 & 50bp hikes. Further out, terminal rate pricing moves up to 4.15%, sharply higher on the day, although nowhere near challenging the cycle peaks of ~4.50% printed back in June.
• Next week’s domestic data docket is headlined by retail sales, job vacancies and the new monthly CPI print.
• Nothing really stands out when it comes to next week’s AOFM issuance slate, outside of a chunky A$2.5bn return of Note issuance after this week’s holiday-inspired hiatus.