Weaker As RBA Repricing Continues

Aussie bonds weakened more than their U.S. Tsy counterparts, leaving the AU/U.S. 10-Year yield spread near the +5bp mark. Cash ACGBs were 5-8bp cheaper, with the 7- to 12-Year zone lagging the broader weakness on the curve. YM finished -7.0, XM was -5.5.

• Short end flow aided the move, with terminal rate pricing on the RBA-dated OIS strip back above 4.00% as participants continued to adjust to Tuesday’s hawkish tweaks in the post-meeting statement. Bills finished 1-10bp cheaper through the reds as that strip steepened.
• Local headline flow was limited, outside of a BBG report which noted that “the first Australian coal shipment to China in more than two years is on the verge of docking.”
• Hedging surrounding the pricing of A$1bn of new SAFA-38 paper would have applied some pressure. Elsewhere, there may have been some background pressure on reports that Virgin Australia is considering taking on new debt ahead of its potential IPO. In addition, pricing of A$1.5bn of EIB’s 5.5-Year climate awareness bond would have added further pressure, while Westpac mandated for 3- & 5-Year senior unsecured paper. Weakness in NZGBs will also have weighed.
• Looking ahead, the release of the RBA’s SoMP (with focus on the underlying inflation forecasts) & A$500mn of ACGB May-28 supply headline on Friday.