AUD Swaps: Busy 10y bid after hawkish Lowe; BNG, NWB Kanga taps

• AUD rates market weaker on hawkish Lowe

• Busy 10y bid; EFPs in

• AOFM sells 2035 ACGBs

• New issues – BNG, NWB Kanga taps

Click here for SDR AUD IRS trades

AUD rates market weaker on hawkish Lowe

The AUD rates market was weaker at the open after hawkish comments from US Fed chair Powell in overnight trading, and fell further after RBA Governor Lowe’s speech.

While the market rallied sharply following the RBA Board meeting on Tuesday, ANZ noticed a risk about some hawkish remarks by Lowe today. The bank agreed that the post-meeting statement contained some dovish messaging which suggested that the RBA may be more data dependent from here. However, some parts of the statement point to the RBA downplaying some of the recent soft data, such as pointing to seasonal patterns affecting January employment growth.

As such, there has been profit-taking at the front-end of the curve, driving a selloff in AUD rates even before Lowe. In his speech earlier today, Lowe said the central bank was closer to the point where a pause was appropriate with the OIS quickly pricing in 50% of chance of a pause next month. However, he highlighted that Australia is still data-dependent, and so the timing of a pause will be decided by data and the board’s assessment of the outlook. He added that inflation in Australia is still high, and likely to remain higher than the target for a few years, and that further tightening is needed if the country doesn’t get inflation down within a reasonable timeframe.

Dealers said the selloff in AUD rates has been backed by players interpreting Lowe’s speech as slightly hawkish when compared to yesterday. In mid-afternoon Sydney trading 3-year bond future was down 8-ticks at 96.53, and the 3s/10s futures curve was 3bps flatter at 27.5bps.

Busy 10y bid; EFPs in

Swaps have been bid, echoing the move in the underlying market and as players readjusted their positions after the dovish US Fed. The cash bond market has been slightly underperforming their derivatives and so EFPs were tighter across the curve.

Flow wise, 3-year swaps were subdued in the morning and was then paid up to 3.89% in the afternoon, up from those traded around 3.86%-2.87% near market close on Tuesday and in overnight trading. 10-year has been busily traded and started off the day with trades between 4.26% and 4.28% in the morning. Paying intensified after mid-day and it traded up to above 4.3% near market close. 5-year traded up to nearly 5bps higher of above 4.07%.

Key EFPs were marked as follows: 3-year down 1.25bps at 43.75bps, 5- and 10-year down 0.75bp at 60.5bps and 56.75bps respectively.

AOFM sells 2035 ACGBs

The AOFM sold AUD500m in 2.75% June 21, 2035 ACGBs at tender today, bringing the new size of the line to AUD10.05bn. Bid-to-cover was 4.52 times and average yield was 3.8184%.

New issues – BNG, NWB Kanga taps

• BNG has priced an upsize worth AUD95m to its existing July 21, 2032 Social Kangaroo bonds to bring the new size to AUD830m. Priced at ASWs + 55bps.

   

• Liberty Finance Pty sold AUD175m in March 16, 2028 FRNs that pay AUD 3M BBSW + 380bps.

   

• Nederlandse Waterschapsbank (NWB) added AUD40m to its existing 2.5%, July 27, 2032 Kangaroo bonds to bring the new size to AUD190m. Priced at 59.5bps over ACGBs.

   

• New South Wales Treasury Corp upsized its existing 2%, March 8, 2033 bonds by AUD50m to AUD9.7945bn

   

• UOB Sydney branch raised AUD1.5bn via selling March 16, 2026 fixed- and floating rate notes in two equal tranches, paying 4.642% and 73bps over AUD 3M BBSW respectively.