AUD Swaps: Cautious ahead of RBA; 5y bid fades

AUD swaps have been bid after the selloff in the USD rates market. Players have turned more cautious ahead of the RBA meeting.

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  • 5-year bid fades; Cautious ahead of RBA

  • New issues – QTC Green 10y bonds


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5-year bid fades; Cautious ahead of RBA

AUD bond futures are weaker today, after two consecutive days of gains, as they tracked the selloff in the USD rates market in overnight trading.


On Wednesday, 2-year US treasury yield rose to its highest level since 2007, as the stronger-than-expected PMI data from China and an overall strong set of ISM data from the US added to worries about persistent inflation in the US. 10-year yield also made an upside break above the key 4% level.


In mid-afternoon Sydney trading 3- and 10-year bond futures were down 5- and 5.5-ticks to 96.43 and 96.155 respectively. The 3s/10s futures curve steepened up by 0.5bp to 27.5bps.


Swaps have been bid, echoing the selloff in the underlying cash bond market. 3-year, which traded mostly around 3.965% in the afternoon on Tuesday, was paid up to 4.0225% after lunch break today. 10-year traded between 4.43% and 4.44% on the day, up from previous close of below 4.39%. 5-year went through 2.5bps higher of 4.18% around mid-day, but paying faded in the afternoon and it then traded little change around 4.155%.


EFPs were mixed with 3-year down a tad to just below 45bps, 5-year 2bps wider at 61.75bps, 10-year up 0.25bp to 57.75bps.


Dealers said players have become less responsive to the US market ahead of the RBA monetary policy meeting which will be held next Tuesday. A trader said some market participants have turned less aggressive about selling off AUD rates after recent domestic GDP data which indicated slower-than-expected growth, but the factors from China and the US will play a key role in the final decision too. Nevertheless, the market in general expects another 25bps of hike this month to bring the cash rate to 3.6%.



New issues – QTC Green 10y bonds

  • Queensland Treasury Corp raised AUD3bn via selling 4.5% March 9, 2033 Green bonds. Priced at 62.6bps over ACGBs and leads are DB, NAB, UBS and Westpac.


  • NAB self-led AUD1.25bn worth of March 9, 2033 bonds as follows:


    • AUD950m paying 6.163% till the quarterly call at par in March 2028, then 2.17% over AUD 3M BBSW.

    • AUD300m, paying AUD 3M BBSW + 217bps with quarterly call at par form March 2028.


  • Westpac Banking Corp New York branch issued via RBA USD140m in February 29, 2024 FRNs that pay USD Overnight SOFR + 23bps.