AUD Swaps: Front-end well bid after RBA statement; Good 10y flow

The RBA statement was hawkish enough to trigger strong paying in front-end swaps where swap rates were up by more than 10bps.

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  • Futures curve bear-flattens after RBA statement

  • Front-end well bid; Good 10y flow

  • New issues


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Futures curve bear-flattens after RBA statement

AUD bond futures opened weaker, tracking but slightly outperforming the selloff in the USD rates market on Thursday.


In overnight trading, 2-year US treasury yield rose to above 4.5%in the US session, or the highest since late-November. This prompted further curve inversion which became the deepest level since 1980s, despite the selloff in long-dated USTs after the weak demand at the 30-year auction.


On top of this, gold prices also fell to their lowest level in a month, dampening demand for AUD rates.


The bond futures sold off further after the RBA’s hawkish quarterly monetary policy statement. According to the statement, the central bank revised up its forecasts for core inflation and wages growth and warned about further interest rate hike to tackle the wave-price spiral.


In mid-afternoon Sydney trading 3-year bond future was down 11-ticks at 96.54, and the 3s/10s futures curve was 4.5bps bear-flatter at 28bps, or the flattest since mid-December.



Front-end well bid; Good 10y flow

Trading in swaps was quiet ahead of the RBA policy statement. A hawkish RBA then triggered some good-sized paying at the front-end of the curve as players re-adjusted their interest rate outlook. 2- and 3-year swaps were paid up 12.5bps soon after the release of the statement, flattening 3s/10s swaps by 9bps to 40bps at one point.


10-year has been relatively busier but outperforming the front-end on the selloff. A dealer reported 10-year bid at 4.2825% intraday, up from those traded around 4.2% near market close on the previous day.


EFPs were generally tighter. 3-year was down 0.5bp at 41.75bps, 5-year down 1.75bps at 56bps and 10-year down 0.75bp at 53bps.



New issues

  • New South Wales Treasury Corp added AUD320m to its existing 2%, March 8, 2033 bonds to bring the new size to AUD8.83bn. Priced at 61.75bps over ACGBs.


  • Westpac Banking Corp has launched 3- and 5-year floating- and/or fixed-rate notes in the +80bps and +105bps over AUD 3M BBSW/ASWs area respectively. Final pricing is expected today.