Westpac Yield Call Weighs Into The Close

YM -2.0 and XM -6.5 in Sydney at the close. The space looked through softer than expected local retail sales data and a firm round of ACGB Nov '25 supply, with the latter's average yield printing ~0.9bp through prevailing mids at the time of supply (per BBG pricing). The weekly AOFM issuance slate revealed a lone round of ACGB supply next week, in yet another change up to the weekly format. The AOFM will auction A$2.0bn of ACGB 2.50% 20 September 2030.

• Weakness was seen into the close, as Westpac lifted their target "for the U.S. 10-Year bond rate by end 2021 from 1.50% to 1.80%. In turn the expected rate by end 2022 has been increased from 1.75% to 2.40%. We expect that higher rate profile to persist right out to end 2024 when we see the U.S. 10-Year bond rate settling at around 3.00% (reaching a sustainable peak before the first rate hike by the Fed). That next cycle can be expected to be more gradual than previous cycles. In turn that adjustment boosts our forecast for Australian 10-Year bonds to 1.90% by end 2021, from 1.55%; 2.50% by end 2022; and 3.15% by end 2024."