Sharply Richer As US Tsys Rally After Softer ADP Data

ACGBs (YM +5.0 & XM +7.5) are sharply stronger after US tsys finally caught a bid. This rebound comes after heavy selling in US tsys this week, which had driven yields to their highest levels in 16 years. A surprisingly weak ADP report data (+81k vs.150k est. and +177k prior) boosted bets the FOMC will be on hold. That helped entice bargain hunting, with short covering adding to the bullish momentum. The US tsy 2-year led the rally, with its yield finishing 10bps lower at 5.05%. The 10-year yield finished down 6bps, after setting a fresh cycle high at 4.88%. At 4.73%, the 10-year yield remains 16bps higher over the week.

• Cash ACGBs are 6-8bps richer, with the AU-US 10-year yield differential 2bps higher at -15bps.
• Swap rates are 5-7bps lower, with the 3s10s curve flatter.
• The bills strip has bull flattened, with pricing +2 to +7.
• RBA-dated OIS pricing is 3-12bps softer across meetings beyond November, with Dec’24 leading. Terminal rate expectations have softened 6bps to 4.28%.
• Today, the local calendar sees Trade Balance data for August.
• Later today, the US calendar sees Weekly Claims, Trade Balance, and various Fed speakers: Cleveland Fed Mester, MN Fed Kashkari, Richmond Fed Barkin, SF Fed Daly and Fed Vice Chair Barr.