Westpac's RBA Watcher Steals The Headlines

T-Notes held to a 0-02 range overnight, sitting at the lower end of Thursday's range, last +0-01 at 131-20, on volume of ~60K. Cash Tsys sit unchanged to 0.5bp cheaper across the curve, with little in the way of tier 1 headlines crossing in Asia. Focus is squarely on Friday's NFP print, which comes in the wake of strong U.S. labour market data, although many continued to question the link between the ADP employment print and headline NFP reading.

• JGB futures drifted lower during the morning session, with participants looking to Thursday's cheapening in U.S. Tsys & the proximity to next Tuesday's 30-Year JGB supply. The contract last prints 7 ticks below settlement levels, with the major cash JGB benchmarks running little changed to ~1.0bp cheaper on the day (10s and 20s were the flat prints). The latest round of domestic household spending data was firmer than expected, but there has been little in the way of notable headline flow to trade off.
• 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." The move in futures was fairly limited, 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. 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.