Tsys Tight With Japan Out, ACGBs Steal Limelight As RBA Eases

T-Notes +0-00+ at 138-10, with the contract happy to stick to a 0-02+ range in Asia-Pac hours, ahead of the well-documented round of local event risk, with the lower liquidity backdrop owing to the Japanese holiday and ensuing cash Tsy market closure (until London hours) also limiting activity.

• Aussie swaps have widened vs. the ACGB space on the back of the RBA decision, with the more aggressive than consensus 5-10 Year bond purchase horizon (6 months vs. 12), alongside an in line with consensus purchase war chest of A$100bn, forward guidance tweak pointing to lower for longer settings at the RBA (after the expected 15bp cuts to the cash rate target, 3-Year ACGB yield target and rate applied to the TFF facility) and openness to doing more, if required, at the fore (Governor Lowe's press conference highlighted that any further easing would likely focus on the bond side of the equation, as opposed to interest rates, with the Bank still against the idea of -ve rates). YM +2.0 and XM +6.0 at typing, as the latter sits shy of the reaction highs, curve flatter vs. pre-decision levels. Bills have also firmed and now sit 2-3 ticks higher through the reds. The IRH1 contract printed as high as 100.01, i.e. in negative BBSW territory. This was aided by the interest rate being paid on E/S surplus balances lodged at the RBA being set at 0.00% (given the recent relationship between this rate and BBSW fixings), which only a few pointed to as their base case ahead of the decision (most looked for 0.01% or 0.05%). A reminder that RBA Assistant Governor Kent recently noted that it wouldn't be surprising to sit the BBSW fixing slip into negative territory.