Steeper Alongside U.S. Tsys, CLF Trimmed Further

Aussie bonds traded in sympathy with U.S. Tsys, steepening, with -1.0 & XM -8.5 at the bell, against a limited backdrop of local catalysts. Swaps were mostly tighter vs. ACGBs across the curve.

• Domestically, the APRA revealed a A$46bn reduction size of the CLF, taking the total size of the CLF down to A$142bn, effective on or before 1 February 2021. The APRA reiterated the "while APRA expects to ensure measured CLF reductions to avoid financial market disruptions, it would be reasonable to expect that if government securities outstanding continue to increase beyond 2021, the CLF may no longer be required in the foreseeable future. Further to this round of reductions, the applications for 2021 CLFs will be assessed in early 2021 for implementation on 1 April 2021. APRA expects further reductions to CLFs at this time. APRA will endeavour to announce the aggregate results of those applications by the end of first quarter of 2021."
• Local final services & composite PMI readings came and went without any notable market impact and only slight deviations vs. the flash readings. IHS Markit noted that "the picture for the Australian services economy remains positive at the end of the year, with expectations for an expansion in activity remaining at high levels. However, concern surrounding the pandemic persists with the re-imposition of restrictions in southern states following a resurgence in infection rates."