Weakness Extended As Supply, NZGBs and US Tsys Weigh

ACGBs (YM -4.0 & XM -8.0) are weaker and at Sydney session cheaps after early strength is unwound. With the domestic calendar light (Judo Bank PMIs and Westpac leading Index), recent weakness reflects a confluence of domestic and offshore factors.

• Domestically, the auction of Nov-33 saw less demand with the cover ratio falling below 3.0x.
• Offshore, there has been an extension of overnight weakness in US tsys in today’s Asia-Pac session and some spillover selling from NZGBs following the release of Q4 CPI data. US tsys are flat to 1bp cheaper, while NZGBs benchmarks are 4bps cheaper in post-CPI dealings.
• While Q4 NZ CPI printed in line with consensus and below the RBNZ’s forecast, the details show that the central bank is likely to remain cautious given persistent domestically driven inflation.
• Cash ACGBs are 4-8bps cheaper, with the AU-US 10-year yield differential 3bps wider at +13bps.
• Swap rates are 4-7bps higher, with the 3s10s curve steeper.
• The bills strip is cheaper, with pricing -1 to -3.
• RBA-dated OIS pricing is 1-2bps softer for meetings beyond May.
• QTC launched a new 4.75% 2 February 2034 A$ fixed rate green bond. Initial price guidance is 52-55 bps over the 10-year futures contract, 53.8-56.8bps over the ACGB 3.00% 21 November 2033. Joint lead managers are ANZ, CBA, NAB and UBS. Transaction expected to price tomorrow.