Twisting, 10s Tighten To U.S.

Twist steepening is evident on both the cash and futures curve vs. settlement levels, with the front end focused on next week's RBA decision, while the long end gave back its early SYCOM gains on the weakness in the U.S. Tsy space, which we have fleshed out elsewhere. YM +0.5, XM -1.5 as a result, with the latter testing its SYCOM lows. Still, the focus on next week's RBA decision, and broad expectations for further easing at that particular event, has allowed Aussie 10s to outperform their U.S. counterpart, with the AU/U.S. 10-Year yield spread moving back into negative territory, after several days of widening.

• On next week's RBA decision, a recent AFR article has suggested that the cash rate target will be cut to 0.10%, alongside the 3-Year ACGB yield target and interest rate applied to the TFF being trimmed to the same level. The piece also suggested that the interest paid on E/S surplus funds lodged at the RBA will fall to 0.01%. Finally, the piece noted that the Bank will buy "billions of dollars of longer-dated Commonwealth and state government bonds with tenors of between five and 10 years." The piece also played down the idea of the Bank adopting a 5-Year ACGB yield target.
• Bills unchanged to -1, with a seller of the IRZ0/M1 spread seen early in Sydney.
• Friday's local points of interest include private sector credit data, A$2.0bn of ACGB 1.50% 21 June 2031 supply and the release of the AOFM's weekly issuance schedule.