Short Squeeze Continues

Aussie bond futures have ticked higher in early trading this week, with YM taking out the recent highs, last +2.0, a touch shy of best levels (after bulls forced the highest levels since liquidity moved into the M1 contract, testing the March highs on a continuation chart in the process), with short positioning (flagged back on Friday) potentially aiding the move. XM also trades +2.0, as both contracts build on their respective gains lodged back on Friday.

• 3-Year EFP has pushed above 10bp, printing at levels last seen back in March.
• We should highlight that the ACGB Apr '24/Nov '24 yield spread has narrowed to the tightest levels seen since the backend of April (last ~18.0bp), reflecting a higher probability that the RBA's 3-Year yield targeting mechanism will be rolled over to ACGB Nov '24 in July. Still, the spread only operates around the mid-point of the range witnessed since mid-March.
• On the supply front, we have seen SAFA launch a tap of its May '32 line, for up to A$500mn, while NBN is taking IOIs on 7-Year issuance.
• Tuesday's local docket is headline by ABS payrolls data and preliminary trade balance data.