Syndication & Global Forces Weigh

YM finished -14.0, with XM -13.0, as the contracts went out just off their respective late Sydney lows. Cash ACGBs saw 12.5-14.5bp of cheapening, with 5s leading the weakness.

• Futures extended on overnight weakness in early Sydney dealing as Asia-Pac participants reacted to Monday’s cheapening in core global FI markets and made room for today’s ACGB May-34 syndication.
• A$14.0bn of the new ACGB May-34 priced, which was probably a little smaller in size than many expected (there was plenty of demand apparent, with A$42.4bn of orders received at the final clearing price).
• Still, XM futures only saw a modest uptick from lows after hedging flows surrounding the syndication subsided.
• Another multi-month high for new COVID cases in China and a soft round of domestic business and consumer confidence data did little to support the space, with a move higher in NZ inflation expectations spilling over, adding a trans-Tasman dimension to the weakness in ACGBs.
• Bills were 1-12bp softer through the reds, with the front end of the reds leading the weakness.
• Peak cash rate pricing in RBA dated OIS nudged a touch higher today, finishing just above 4.10%.
• Looking ahead to Wednesday, the local docket will be headlined by an address from RBA Deputy Governor Bullock, with the topic of “The Economic Outlook” being discussed in front of the ABE annual dinner.