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Weaker But Off Cheaps As U.S. Tsys Twist Flatten

AUSSIE BONDS

ACGBs close weaker (YM -17.0 & XM -6.0) but off session cheaps as U.S. Tsys twist flatten in Asia-Pac trade. Cash ACGBs bear flatten with the 3-year and 10-year benchmarks respectivcely 16bp and 6bp weaker.

  • The AU-US 10-year yield differential is unchanged on the day at -16bp, but as flagged earlier, too low versus developments at the short-end over the past week.
  • Swaps close with the 3s10s curve 10bp flatter and rates 3-13bp higher. EFPs close 3-4bp tighter.
  • Bills cheapen 12-25bp with the strip flattening.
  • RBA dated OIS firms 27-30bp for meetings beyond May in sympathy with global STIR and a 50bp hike from the ECB yesterday. Nonetheless, April meeting pricing remains around flat with 14bp of easing priced by year-end.
  • The local calendar is light next week with RBA Kent's speech at the KangaNews Summit and RBA Minutes the highlights. While RBA Governor Lowe provided further colour the day after the March policy meeting, the market will surely be looking for reasons why it makes sense to price in an end to the tightening cycle in the face of stronger economic data this week.
  • Banking headline watching is the game plan ahead of Eurozone CPI, U.S. Industrial Production and University of Michigan Sentiment data tonight.

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