Weakness Develops In Afternoon

Weakness developed in the afternoon after a contained two-way start, with YM -4.0 and XM -6.0 at the close. Weaker Asian trading for U.S. Tsys was the dominant driver, with RBA Governor Lowe’s testimony generally viewed as having covered familiar ground. Lowe did however conclude the Q&A session by suggesting it was plausible that rate cuts could be in play in ’24, although noted that a lot “has to go right” for that to be realised.

• Cash ACGB yields were 5-9bp higher across the curve, steepening. The AU-US 10-year cash bond yield differential narrowed to -6bp.
• Swaps generally tracked bonds with rates 6-8bp higher.
• Morning resilience in Bills gave way to weakness with the strip 3-5bp weaker, led by the reds.
• March meeting RBA-dated OIS continues to show an 88% chance of a 25bp hike. Terminal rate expectations firmed by 5bp to ~4.17%.
• The AOFM successfully sold A$500mn of the 4.25% April 2026 ACGB with a cover ratio over 4.00x and very firm pricing, while outlining a two ACGB auction schedule for next week, covering the familiar A$1.5bn in issuance.
• Looking ahead, the highlights for next week’s calendar will be Wednesday’s release of Q4 WPI, with the latest RBNZ decision due on the same day.