Weaker & Near Cheaps, Narrow Ranges, May-41 Bond Supply Absorbed

With the absence of domestic data, ACGBs (YM -6.0 & XM -7.5) are holding cheaper and near session cheaps after dealing in relatively narrow ranges in today’s Sydney session.

• Following yesterday's twist-steepening, US tsys are offering limited direction for the local market. Cash US tsys have seen minimal movement during today's Asia-Pac session.
• Today’s May-41 bond was smoothly absorbed, with the cover ratio surging to 3.300x, a notable increase from the 2.100x recorded at the August 2023 auction.
• Today's auction bid seems to have found support from a higher outright yield, a steeper yield curve and a favourable outlook on the RBA policy stance, following the removal of the explicit tightening bias in March.
• Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential 3bps higher at -22bps.
• Swap rates are 4-6bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -7.
• RBA-dated OIS pricing is flat to 5bps firmer across meetings. A cumulative 33bps of easing is priced by year-end.
• Tomorrow, the local calendar sees Judo Bank Composite & Services PMIs and Building Approvals data alongside a Speech by Brad Jones, Assistant Governor (Financial System) at COSBOA’s National Small Business Summit.