AUD Swaps: RBA seen hiking 25bps but softening its hawkish tone; 3-10y given

• RBA to hike by 25bps but soften its hawkish tone

• ANZ sees opportunities in receiving Oct OIS

• 3-10y well offered

• AOFM sells 2026 ACGBs

• New issues

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RBA to hike by 25bps but soften its hawkish tone

AUD bond futures rallied on Monday ahead of the RBA decision tomorrow. 3- and 10-year bond futures were 8- and 13.5-ticks higher at 96.47 and 96.23 in mid-afternoon Sydney trading, and the 3s/10s futures curve was 5.5bps flatter at 24bps.

Dealers said the market expects a 25bp RBA hike tomorrow, but forecasts the board to soften its tone following a series of weaker-than-expected domestic economic data since the last RBA meeting, including higher-than-expected unemployment, a plunge in consumer confidence back to recessionary lows, slower than expected wages growth, stagnant nominal retail sales since September, and slower than expected underlying December quarter GDP growth. Data released by Melbourne Institute today also showed that inflation in February slowed to 6.3% year-on-year, down from 6.4% in January. On a monthly basis, it grew by 0.4%, down from 0.9% in the previous month.

ANZ sees opportunities in receiving Oct OIS

Indeed, ANZ said risks are currently skewed towards a rally in AUD rates following the RBA Board meeting. The bank noticed that recent domestic data have been almost uniformly disappointing, but market pricing for the terminal cash rate is still sitting close to 4.2%. ANZ believes that it would be difficult for the RBA to out-hawk the market in Tuesday’s decision given how much is priced in.

“If the RBA were to shift its language slightly to account for the soft data, market pricing for terminal could easily adjust to 4.1%; but if it maintains the language of its February meeting, markets are unlikely to move much,” the team said. As such, ANZ sees value in receiving Oct-23 RBA OIS to target it to fall to 4.05%, after entering it at 4.17%.

3-10y well offered

In swaps there has been some modest amount of receiving in 3-year since mid-morning domestic trading. It traded down to 3.96% in the afternoon, down from those traded around 4.08% near market close on Friday but leaving 3-year EFP unchanged at 45bps.

10-year saw some light offered-side flow at down to around 4.295% in the morning session before last seen changing hands at 4.33%. These compared to those traded mostly between 4.47% and 4.48% on Friday. 10-year EFP narrowed a tad to 57.75bps. 5-year was offered down more than 10bps lower at 4.125% after lunch break and tightened EFP there by 0.75bp to 60.25bps.

AOFM sells 2026 ACGBs

The AOFM sold AUD500m in 0.5% September 21, 2026 ACGBs at tender today, bringing the new size of the line to AUD37.8bn. Bid-to-cover was 5.24 times and average yield was 3.5612%.

New issues

• ANZ issued the following foreign currency bonds:

   

  • SGD100m, 4.18%, March 14, 2024 via Natix.

  • USD100m, 5.675%, March 14, 2024 via ANZ.

   

   

• CBA self-led AUD1.75bn in March 15, 2038 callables that pay 6.704% till the single call at par in March 2023, then AUD 3M BBSW + 245%.

   

  It also launched 3-year fixed- and floating-rate USD notes via BofA, Citigroup, GS and JPM as follows:

   

  • FRNs at SOFR equivalent in 144A/Reg S format.

  • Fixed-rate tranche at around +95bps area.

   

• Liberty Financial has mandated Barrenjoey, DB, NAB and Westpac to a possible 5-year AUD-denominated 5-year senior unsecured MTN.

   

• Nationwide Building Society is planning a 5-year senior preferred Kangaroo bond offer via RBC, TD securities and UBS.

   

• Westpac issued via ANZ CNY100m in 3.5%, March 10, 2026 Dim sum bonds.