Underperformance Evident

Aussie bonds have succumbed to the broader round of weakness in core FI, with YM closing -4.0, XM -17.0, albeit with a brief pause as the RBA stepped in to enforce its 3-Year yield target, although markets ultimately overpowered the impact from the announcement, resuming the move lower. Technically, XM has moved below the 50% retracement of the jump from the March trough to the April high.

• Re: the Aussie/U.S. 10-Year yield spread, recent weeks have seen many chopped around by the crosswinds created by the U.S. fiscal impulse/reflation trade narrative, RBA policy and the Aussie bond space's high beta status. This has resulted in most sell-side names reverting to a play the range mantra. The recent range has now broken, with the spread hitting the widest levels seen since October '20 during Monday trade.
• On the sovereign rating front Fitch affirmed Australia at AAA; Outlook Negative on Monday.
• The local COVID vaccine rollout is now underway, with PM Morrison receiving his shot over the weekend.
• Prelim trade data headlines the local docket on Tuesday.