Working Away From Lows In Sydney Trade

Aussie bonds have edged further away from their overnight/early Sydney cheaps as we have worked our way through the Sydney day, tracking a bid in U.S. Tsys as core FI markets have unwound a little of Tuesday’s Fedspeak-inspired cheapening. Worry surrounding U.S. House Speaker Pelosi’s visit to Taiwan also aided the move in ACGBs away from worst levels amidst a barrage of sharp Chinese rhetoric and trade embargoes on the island, although the lack of escalation of a military nature meant that the moves away from lows remained fairly shallow.

• Cash ACGBs run 6.0-12.5bp cheaper. YM is -12.5 and XM is -11.0, while Bills are 4 to 18 ticks cheaper through the reds, bear steepening.
• The latest round of ACGB Nov-32 supply went well enough, with the average yield pricing 1.15bp through prevailing mids, although the cover ratio printed 2.44x, coming in below the six-auction average of 2.95x. The recent move away from cycle cheaps in core FI markets and yesterday’s RBA decision likely helped promote firm pricing at the auction, with the cheapness of the line vs. the nearby benchmark 10-Year ACGB May-32 likely aiding in digestion, although overall demand wasn’t overwhelming, per the cover ratio dynamics.
• There was some limited trans-Tasman gyrations surrounding New Zealand’s labour market data, which faded quickly.
• Thursday’s domestic data docket will be headlined by Australian trade balance figures for June, with little else on offer.