Twisting Steeper

The curve has twisted steeper when compared to Sydney settlement levels, with YM +1.9 and XM -4.0. Longer dated cash ACGBs have cheapened by the best part of 5bp, with that curve twisting around the 6-Year point.

• A quick look at RBA SLF usage points to a pullback in borrowing of ACGB Nov-24 (from the ~A$2.8bn seen Tuesday), although that still remains elevated at ~A$1.4bn as of Wednesday. Collateral shortages seemingly remain in play, with that issue widening out to cover the 10-Year zone in recent days. This has likely been one factor playing into the notable EFP widening witnessed in recent weeks, while it has also supported demand at recent auctions covering ACGBs with a ’24 maturity, as well as yesterday’s Nov-31 offering. Yesterday provided the final ACGB auction of calendar ’21, our best guess is that supply will resume on the week of 17 Jan ’22. Meanwhile, RBA ACGB purchases will continue “up until 23 December 2021,” purchases will then be paused “for two weeks over the holiday period. Purchases will resume on 10 January 2022.” This could exacerbate the ACGB collateral shortage, further boosting usage of/widening the maturities borrowed under the SLF. Elsewhere, we note that the MYEFO should be delivered next week (16 December), while ACGB Dec-21 will mature on 21 December (there is currently ~A$16.4bn of the line outstanding).
• Looking ahead to today’s docket, the latest round of scheduled RBA ACGB purchases is set to be delivered.