Solid Apr-27 Supply Sees 5s Lead The Bid

ACGBs unwound their earlier twist flattening, with cash ACGBs running 0.5-3.0bp richer across the curve. 5s outperformed after the solid round of ACGB Apr-27 supply, while the maturity of ~A$24.8bn of ACGB Jul-22 today possibly contributed to some richening in the front end as well, as cash is redistributed. YM is +2.0, operating around best levels after bettering its overnight highs, while XM is flat on the day, off best levels after breaching its own post-Sydney highs earlier. Bills run 3 to 5 ticks richer through the reds.

• The latest round of ACGB Apr-27 supply went very well, with the recent stabilisation in the Aussie bond space and previously-flagged micro relative appeal of the line contributing to its smooth digestion. The weighted average yield printed 2.66bp through prevailing mids (per Yieldbroker), with the cover ratio coming in at 3.99x, comfortably above the 3.00x level (a solid cover ratio in post-QE times).
• The AOFM issuance slate announced for next week provoked little reaction in Aussie bonds, with A$1.5bn of ACGBs and A$2.5bn of notes on offer.
• Hiking expectations for the RBA’s Aug meeting have continued to taper from Thursday’s extreme, aided by a similar move in pricing surrounding the July FOMC meeting in the U.S.. STIR markets now price in ~56bp of tightening for the RBA’s Aug meeting, a pullback from the ~64bp peak witnessed on Thursday. TD Securities has joined Goldman Sachs and Nomura in calling for a 75bp hike for August (and 50bp for Sep), while Westpac and CBA both see a 50bp hike on the cards for Aug (followed by a 25bp and 50bp hike in Sep, respectively).
• RBA Governor Lowe is due to speak on a panel over the weekend, although the topic will be CBDCs and cryptocurrencies, limiting the scope for comments surrounding the economy and monetary policy settings.