AUD Swaps: 10y given after weak China data; Lloyds eyes Kanga;TD Bank 3y covered

Workstations 26 May 2022
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Weak China data has backed demand for AUD rates and 10y saw good amount of receiving. Lloyds is planning a 6NC3 Kanga offer. TD Bank in 3y covered.

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  • Bond futures rebound after weak China data

  • Good 10y offers; Small-sized 3y receiving

  • New issues – Lloyds plans 6NC3 Kanga; Toronto-Dominion Bank   3y covered bonds

 

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Bond futures rebound after weak China data

AUD bond futures rebounded today, despite the selloff in the USD rates market which also took 2-year US treasury yield to above 5%. The rally has been supported by those who readjusted their prior positions which involved aggressive RBA tightening as now that the central bank may pause as soon as next month. The bond futures rose further near mid-day after weaker-than-expected from China.

 

Official data released earlier today showed that China’s inflation in February was 1%, down from 2.1% in the previous month and below economists’ forecast of 1.9%. PPI growth the same month worsen from 0.8% of contraction in January to 1.4%. The market had expected 1.3% of negative growth. Australia is a key trading partner of China, and a weak economy in China means weak demand for exports from Australia.

 

3-year bond future was up by more than 7-ticks intraday before being marked 3-ticks higher at 96.558 near market close. The 3s/10s futures curve was unchanged at 27.5bps.

 

 

Good 10y offers; Small-sized 3y receiving

Trading in 3-year outright has not been busy with only very small-sized receiving between 3.88% and 3.89% in the afternoon session, down from those traded up to above 3.98% on Wednesday. 10-year has been relatively busier with offered-side flows between 4.26% and 4.28% in the morning. Receiving eased after mid-day and 10-year went through between 4.28% and 4.295% before last seen changing hands at 4.25% again. These compared to previous close of above 4.31%.

 

5-year traded in several clips after lunch break, backed by better receiving there. Traders have been between 4.055% to 4.07% on the day, down from previous close of nearly 4.08%.

 

EFPs were mostly tighter. 3-year was down 0.75bp at 43.5bps, 5-year down a basis point to 60bps, 10-year down 0.75bp at 56.25bps.

 

 

New issues – Lloyds plans 6NC3 Kanga; Toronto-Dominion Bank 3y covered bonds

  • Lloyds Bank is planning a 6NC3 fixed- and/or floating-rate Kangaroo bond offer with initial price thoughts at around +200bps over AUD 3M BBSW/ASWs.

     

  • SAFA added AUD73m to its existing June 16, 2027 FRNs to bring the new size to AUD1.258bn. The deal pays 31bps over O/N RBA cash rate.

     

  • Toronto-Dominion Bank raised AUD2.5bn via selling the following March 16, 2026 covered bonds:

     

    • AUD950m, 4.5%.

    • AUD1.55bn paying AUD 3M BBSW + 70bps.

     

    Leads are ANZ, CBA, NAB, Nomura, TD Securities and Westpac.

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