Westpac's Evans Headlines Matters With RBA Call Tweak

Aussie bonds cheapened a little, aided by Westpac's Bill Evans tweaking his RBA call. Evans suggested that "the RBA Board is likely to decide that there will be no extension of the YCT to the November 2024 bond at the July Board meeting because such action would imply no tightening till 2025." He did stress that "Westpac disagrees with that interpretation but cannot dispute the resulting decision." He previously expected the YCT to be extended to ACGB November 2024 and was perhaps the last remaining major voice in that camp. On the broader bond buying scheme Evans suggested that "the QE program has now matured to allow the Board more flexibility going forward. We expect the Governor to announce an open-ended A$5 billion per week purchase program to be reviewed later in 2021 to be introduced following the completion of QE2. Given the confidence the RBA has in the QE program and Australia's low relative use of QE we continue to expect that the ultimate level of additional purchases will reach A$150 billion which we have advocated for some time." ANZ also pointed to the chances of the implementation of a "flexible" QE scheme.

• The move in futures was fairly limited all in, with contracts now off lows, YM -2.5 and XM -3.0. 3s cheapened by ~4.5bp in cash ACGB trade, providing the weak point on the curve. EFPs widened a touch, but sit comfortably away from their recent highs.
• Elsewhere, the AOFM weekly issuance looks thin, while today's ACGB Nov '25 auction printed 0.76bp through prevailing mids at the time of supply, with the cover ratio printing at a comfortable ~3.5x.