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Some Colour Behind The Earlier Move In The Belly Of The ACGB Curve


Re: the earlier move in the front end of the ACGB curve, it would seem that the driving factor may have been an adjustment re: the 3-Year ACGB yield call of Westpac chief economist Bill Evans. Evans now looks for the 3-Year ACGB yield to move to 0.40% by the end of Dec '21 (prev. 0.35%). The belly of the ACGB curve has been particularly soft in relative terms during post-FOMC dealing, which has allowed the 2-/5-/10-Year butterfly to extend to the widest levels witnessed since the vol. event in March (which in itself represented the highest levels seen since '18). The ACGB Apr '24/Nov '24 yield spread has pushed back out towards the wides witnessed back in March as participants price out the chance of the RBA rolling its 3-Year yield target into ACGB Nov '24 at its July meeting, weighing on the broader belly in the process. The sell-side community has long pointed to the potential for the belly to underperform on any QE tapering from the RBA. Elsewhere, AUD 1-Year/1-Year forward swap rates are pushing on to levels not seen since April '20.

MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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