The RBA Doubles Down

The knee jerk bid in Aussie bonds on the back of the RBA's upsizing of its scheduled ACGB purchases (to A$4.0bn from A$2.0bn) was quickly reversed, with the pullback from best levels in longer dated paper extending a little thereafter alongside a similar move in U.S. Tsys. Still, YM and XM remained comfortably above settlement levels on the day. YM finished +9.0, bolstered by the broader bid in play in local core FI markets since Friday's Sydney settlement and the upsizing of RBA bond purchases, with XM +25.0, which was largely a function of Friday's recovery in U.S. Tsys and subsequent extension of the move during Sydney hours.

• The RBA's move to upsize its scheduled ACGB purchases came on a day which saw local rates already well bid, with the move set to prolong optionality re: the future of monetary policy given the recent speculation that the RBA may choose not to roll its 3-Year yield target to ACGB November '24 when the time comes to make such a decision (the Bank also holds ~60% of ACGB '24 on issue).
• The Australian/U.S. 10-Year yield spread closed comfortably back below 30bp.
• 90-day bills also benefitted from the move, with the strip 1-5 ticks firmer on the day through the reds.
• Locally, ANZ job ads and housing finance data were particularly firm, although had no meaningful impact on price action given developments elsewhere.
• Tomorrow's RBA decision awaits (expect our full preview to be posted during the London morning). Note that the yield of ACGB Apr '24 (the bond covered by the Bank's 3-Year target scheme) is back to 0.115%, well within the Bank's tolerance band, after a brief foray above 0.150% last week.