March 20, 2023 21:54 GMT
Softer As Risk Improves
ACGBs are softer (YM -3.0 & XM -5.0) after U.S. Tsys trade lower softer in a relatively narrow range. US cash curve bear flattened with 2-year and 10-year yields respectively 11bp and 6bp higher. The announcement over the weekend of coordinated central bank action to enhance U.S. dollar liquidity, along with the news of UBS’s 3.25bn takeover of Credit Suisse, improved risk sentiment ahead of the FOMC policy decision on Wednesday. News that Credit Suisse AT1 bondholders would take the $17bn loss in full was however a distracting narrative.
- Cash ACGBs open 3-5bp weaker with the 3/10 curve 2bp steeper and the AU-US 10-year yield differential -3bp at -19bp.
- Swaps open 3-5bp cheaper with EFPs slightly wider.
- Bills strip twist flattens with pricing -7 to +1.
- The RBA Minutes, slated for release today, will provide further details on the dovish shift at the March meeting. With the market not just pricing a policy pause at the April meeting but an end to the tightening cycle, the market will be assessing whether it has overstretched by pricing more than 25bp of easing by year-end.
- RBA dated OIS opens with pricing 2-5bp firmer across meetings. April meeting pricing is virtually flat with 37bp of easing priced by year-end.