AUD Swaps: Higher jobless rate prompts light 5y offers; Lowe's testimony eyed

Bond chart 30 Jan 2023
The AUD rates market trimmed losses after a higher-than-expected jobless rate. 5y swaps were offered briefly.

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  • 3y bond future rebounds on unexpectedly higher jobless rate

  • Light 10y bid; Sporadic 5y offers; Lowe’s testimony eyed

  • New issues


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3y bond future rebounds on unexpectedly higher jobless rate

AUD bond futures were weaker in earlier trading as they tracked the losses in US treasuries.


US treasury yields rose on Wednesday with 10-year yield hitting its highest level of the year as latest data indicated a robust US retail sales.


10-year then trimmed losses and 3-year rose by 5-ticks intraday after weaker-than-expected jobs data as it slightly relieved worries over more aggressive RBA monetary policy tightening.


Official data released this morning showed that jobless rate in Australia was surprisingly higher at 3.7% in January. Economists had expected it to stay unchanged at 3.5%. The move was mainly driven by a sharp loss in full time employment posts which offset a good growth in part time employment. Participation rate fell a touch from 66.6% to 66.5%.


In early-afternoon Sydney trading 3-year bond future was up 2-ticks at 96.54, and the 3s/10s futures curve was 6bps steeper at 32.5bps.



Light 10y bid; Sporadic 5y offers; Lowe’s testimony eyed

Dealers said the latest jobs data put a brake on aggressive swap trading, especially before RBA Governor Lowe’s second round of testimony tomorrow. “He has to take this new set of data very seriously, as the economy has suffered rather than benefited from the central bank’s tightening policy,” a trader explained of the cautious mood in the market today. “Most market participants are waiting for Lowe’s reaction tomorrow. He may sound slightly less hawkish, but it’s not the right time for him to turn dovish,” he added. The source forecast good receiving in short-end swaps if Lowe refrains from a firm hawkish stance.


Nevertheless, there was light paying in 10-year at about 3bps higher of 3.32% in mid-morning domestic trading, tracking but outperforming the selloff in its underlying ACGBs. 10-year EFP therefore tightened up by 1.25bps to 53bps.


5-year traded in several clips at about 2bps lower of 4.05%, backed by receiving interest there after the data. 5-year EFP widened out by 1.5bps to 58.75bps.



New issues

  • Australian Capital Treasury raised AUD1.25bn via selling 4.5% October 23, 2034 bonds. Leads are ANZ, CBA, NAB and UBS.


  • TCorp increased the size of its existing bonds as follows:


    • AUD50m, 2.25%, September 15, 2033 to bring the new size to AUD8.11bn. Priced at 40.6bps over ACGBs.

    • AUD75m, 1.25%, November 19, 2027. The new size is now AUD7.74bn. Lead is CBA.