Sharply Weaker, Pressured By RBA, US Tsys & JGBs

ACGBs (YM -11.0 & XM -10.5) are sharply lower and at/or Sydney session lows. Today’s move brings the sell-off over the past 24 hours to around 15-20bps.

• The local calendar has been light today, with Westpac Leading Index (+0.07% m/m in September versus -0.04% prior) as the only release.
• Accordingly, today’s move appears linked to a continuation of the firming in RBA tightening expectations following yesterday’s RBA Minutes for the October meeting. RBA Governor Bullock answered questions at the AFSA annual summit today, reiterating the central bank’s focus on bringing inflation back down.
• Local participants have also likely been influenced by developments in global bond markets. Overnight, US tsy yields pushed to or close to cycle highs across benchmarks. So far in Asia-Pac trade today, cash US tsys are flat to 2bps richer.
• Also adding pressure has been the marked sell-off and new cycle highs for longer-dated JGBs. JGBs have reacted to news from BBG sources that “the BOJ is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month.”
• Cash ACGBs are 10-11bps cheaper, with the AU-US 10-year yield differential 2bps higher at -18bps.
• Swap rates are 11-12bps higher.
• The bills strip has bear-steepened, with pricing -4 to -13.
• RBA-dated OIS pricing is 4-12bps firmer for ’24 meetings.