AUD Swaps: 3-5y EFPs squeezed post US CPI; Cautious 10y offers

Squeeze 26 Aug 2020
Soft US CPI data has driven a marked tightening of 3- and 5-year EFPs. 10y offers were however cautious ahead of domestic data.

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  • Bond futures rally after soft US CPI data

  • 3- and 5-year EFPs squeezed

  • 10y cautious ahead of domestic jobs data

  • New issues



Bond futures rally after soft US CPI data

AUD rates players felt the relief after US CPI data for November printed below expectations. The 7.1% worth of inflation vs consensus at 7.3% and 7.7% in October has prompted thoughts about a nearer US Fed pause, or at least a less hawkish stance. Currently, the market is pricing in slowing down of the tightening cycle as early as February when a 25bps worth of hike is expected by then.


AUD bond futures rallied, with 3-year bond future up by 7-ticks intraday. In mid-afternoon Sydney trading 3- and 10-year bond futures were up 6- and 5-ticks at 96.93 and 96.645 respectively, steepening the 3s/10s futures curve by a basis point to 28.5bps.



3- and 5-year EFPs squeezed

3-year swaps were subdued in the morning with a couple of very small-sized forward trades. Receiving emerged in the afternoon session when some good-sized trades went through 4.5bps lower of 3.57%.


Slightly up the curve, 5-year traded in several clips in a tight range around 3.75%, down from previous close of around 3.795%.


Player’s renewed expectation about the next Fed’s step has been reflected in the marked tightening of 3- and 5-year EFPs, which narrowed by 4bps and 3.5bps to 45bps and 63bps respectively.



10y cautious ahead of domestic jobs data

10-year was offered down 4.5bps lower of 3.965% intraday after being traded between 3.97% and 4% in the morning session. “US inflation at 7.1% was still a high level and it’s not the perfect time to unwind positions related to an aggressive Fed hike, and we have our own problem to deal with too,” a dealer explained of the cautious receiving in 10-year in the morning session, and expressed his concerns over the domestic jobs data tomorrow amid the already tight job market in Australia .


10-year EFP narrowed marginally to just above 60.5bps.



New issues

  • Aurizon Network raised AUD70m via Mizuho Hong Kong as follows:


    • AUD20m, 6.56%, December 21, 2034.

    • AUD50m, 6.392%, December 21, 2032.


  • NAB self-led AUD40m in 5.38%, December 21, 2037 bonds.


  • Westpac issued USD100m in July 13, 2023 FRNs that pay USD Overnight SOFR + 45bps.