Signs Of Light Short Cover Ahead Of RBA

YM & XM continued to benefit from the worry surrounding the well-documented Russia-Ukraine situation, reversing the initial dip seen in overnight dealing, aided by some NY session richening in the U.S. Tsy space.

• Note that this came after YM and XM popped higher into Monday’s Sydney close. A quick look at open interest data revealed a reduction in both YM & XM open interest on Monday (-20K & -11K, respectively) which points to some potential Ukraine-, and perhaps, RBA-related short cover. Participants may have shown some worry that the former may result in the latter sounding a little more dovish (note that the RBA is already dovish when compared to the wider market and sell-side views). YM and XM have shown through their respective overnight highs in early Sydney dealing but sit a touch shy of their early Sydney peaks, last dealing +4.0 & 0.5.
• As a quick reminder, the RBA is set to leave its monetary policy settings unchanged when it issues its latest decision later today. We believe that the Bank will tip its hat to the risks posed by the Russia-Ukraine conflict, but are of the opinion that it is too early to make any firm conclusions re: the economic significance of the matter (see our full preview here).
• Outside of the RBA decision, GDP partials will continue to roll in (BoP data and net export contribution to GDP), with CoreLogic house price metrics, housing finance data and the weekly ANZ-Roy Morgan confidence print also due.