AUD Swaps: 3y given on dovish RBA; China trade data backs 10y offers

RBA Governor
The RBA has dropped its reference to multiple interest rate hikes ahead, driving receiving in 3y swaps. 10y has been well offered after China data.

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  • Short-end rallies hard as RBA may pause as soon as April

  • 3y given amid revised interest rate outlook

  • China trade data prompts 10y offers

  • New issues


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Short-end rallies hard as RBA may pause as soon as April

As had been widely expected, the RBA raised the benchmark interest rate by 25bps to 3.6%, or the record tenth straight rise. This took the rate to its highest level since mid-2012. However, the board dropped its reference to multiple interest rate hikes ahead. Lowe’s comments have shifted to “The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to targe and that this period of high inflation in only temporary” from “The Board expects that further increases in interest rates will be needed over the months ahead to ensure inflation returns to target”.


The AUD rates market rallied hard after this remark, with the front-end leading the move. 3-year bond future was up to 2-ticks lower at 96.46 in the morning, but spiked to 96.64 soon after Lowe. In mid-afternoon Sydney trading it was 13-ticks higher at 96.61, and the 3s/10s futures curve bull-steepened by 5bps to 24.5bps.


Dealers said although the market had expected a softening of the hawkish tone, but Lowe’s comments prompted thoughts that the central bank may pause as soon as April. Indeed, the latest economic data also suggested that the high interest rate has made further damage to the economy.


Official data released earlier today showed that trade surplus tightened further in January, from AUD12.985bn in the previous month to AUD11.688bn. Economists had forecast it to be around AUD12.25bn. The move was largely due to a small increase in exports being offset by a spike in imports due to a sharp increase in automobile shipments.



3y given amid revised interest rate outlook

3-year swaps started off the day with a few trades which were backed mostly by 2-way interest, although there were also light paying at up to 3.98% right after lunch break. It was then offered down 13.5bps lower at 3.835% in the afternoon session as players factored in the revised interest rate outlook. EFP there widened out by a basis point to 46bps intraday as swaps there have been underperforming the rally in the underlying ACGBs.



China trade data prompts 10y offers

Surprisingly, 10-year has been relatively busier especially in the afternoon session. A dealer attributed the move to a reaction to the latest China trade data which showed a sharp contraction in imports in February. “China is a key importer of Australia’s commodities, and the data pointed to a weaker-than-expected demand to come,” the source explained of the receiving in 10-year. 10-year was offered down to 4.265% in mid-afternoon Sydney trading, down from those traded around 4.33% near market close on the previous day. 10-year EFP was 0.5bp tighter at 57.25 at time of writing.



New issues

  • CBA New York branch issued USD1bn in 5.316% March 13, 2026 bonds at 70bps over USTs.


  • Korea Housing Finance Corp has mandated HSBC, Nomura and UBS to arrange a possible 3-5y fixed- and/or floating-rate AUD denominated bond offer.


  • NBN Co Ltd raised EUR1.35bn via selling the following bonds:


    • EUR750m, 4.125%, March 15, 2029 at mid-swaps + 85bps with make whole call at 25bps until January 2029 and single call at par in December 2028.

    • EUR600m, 4.375% March 15, 2033 with make whole call at 25 until December 32 and single call at par in December 2032. Priced at 115bps over mid-swaps.