Significantly Cheaper, 3Y Futures Hit New Cycle High, Trade Surplus Beats

ACGBS sit at session lows (YM -10.0 & XM -11.0) after the release of the May trade data reveals a better-than-expected surplus of A$11.79bn (A$10.9bn est). The surplus widens 12.8% from a month earlier with exports and imports rising respectively by 4.4% m/m and 2.2% m/m. Exports to China increased 9% m/m with exports to Japan up 12% m/m.

• The current ACGB 3-year futures (YMU3) contract has pushed to a new cycle low of 95.93. The previous low of 95.96 (continuous contract) was set back on June 17.
• Cash ACGBs are 9-11bp cheaper with the 3/10 curve steeper and the AU-US 10-year yield differential unchanged at +16bp.
• Swap rates are 10-12bp higher with EFPs slightly wider.
• Bills strip bear steepens with pricing -4 to -14.
• RBA dated OIS pricing is 2-9bp firmer for meetings beyond Aug'23 with Mar'24 leading.
• (AFR) Two leading economists have warned that the RBA risks repeating the same mistakes of three decades ago and potentially causing a recession. (See link)
• TCorp (NSW) intends to auction A$400 million of its existing 2.50% November 2032 Sustainability bond. Bids will be accepted via Yieldbroker on an exchange for physical basis July 6. Results to be communicated thereafter.