Twisting Steeper

The local COVID situation supported the front end of the Australian bond curve in early trade this week, leaving YM +2.5 and XM -2.5 at typing, as the former unwound its modest overnight cheapening and more. Cash ACGB trade has also seen some twist steepening, with 3s representing the firmest point on the curve, while the long end has cheapened by ~2.5bp vs. Friday's closing levels.

• As a reminder, the weekend saw the scope of Sydney's lockdown broadened to cover the entire Sydney area, with the length of the lockdown increased to 2 weeks. Elsewhere, the city of Darwin implemented a "hard" two-day stay-at-home order after the discovery of a handful of COVID cases.
• The NSW premier hopes to announce a support package for business tomorrow/Wednesday.
• The latest round of scheduled ACGB purchases covering maturities of Nov '24 to May '28 will have also provided support for the front end/belly of the curve.
• Today's A$300mn ACGB Jun '51 supply saw the weighted average yield price a comfortable 0.94bp through prevailing mids at the time of supply (per Yieldbroker), with takedown likely supported by the more than palatable DV01 on offer and recent demand for long end ACGBs. The cover ratio printed at a healthy enough ~3.52x.