AUD Swaps: Cautious paying eases after lunch break; Jobs data eyed

• Bond futures’ rally end after US CPI

• Cautious paying eases after lunch break

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Bond futures’ rally end after US CPI

After four consecutive days of gains, the rally in the AUD rates market ended today, with 3-year down by around 8-ticks at 96.87 and 3s/10s futures curve 2.5bps flatter in mid-afternoon domestic trading.

The move echoed those in the USD market in overnight trading in which the selloff in equities due to the SVB incident ceased as traders believed the worst of the turmoil in the banking industry has passed. This dampened demand for rates. The still elevated CPI data, though matching economists’ expectations, also prompted selling of US treasuries.

Cautious paying eases after lunch break

Swaps have generally been bid but players have been cautious ahead of the domestic jobs data which will be released tomorrow. A market participant said the market in generally believes jobless rate to match forecast, but a worse-than-expected print may not trigger panic buying of AUD rates following recent sharp rally in the market.

Cash bonds have been underperforming their derivatives on the selloff. EFPs are therefore tighter across the curve with 3-year down 2.5bps at 54bps, 5-year down 0.5bp at 45.5 and 10-year down 1.25bps at 65bps.

In outright swaps, 3-year swaps were paid up 2-3bps in the US session, and such interest extended to domestic trading today. A dealer reported paying at up to 7bps higher of 3.68% near market open before light receiving interest emerged after lunch break when it traded between 3.585% and 3.595%.

5-year traded 2-4bps higher in the morning before last seen changing hands about 1.5bps higher of 3.845%. 10-year was paid up 9.5bps higher at 4.185% in earlier trading before being traded between 4.095% and 4.115% in the afternoon session.