AUD Swaps: 3y yield down by more than 25bps on CS woes; 3y swaps well offered

Chart line 30 Jan 2023
Steep losses in CS share price has triggered panic demand for AUD rates. 3y yield slumped by more than 25bps and 3y swaps have been well offered.

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  • 3y ACGB yield down by more than 25bps on CS woes

  • 3y swaps well offered, EFP wider in earlier trading

  • New issues


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3y ACGB yield down by more than 25bps on CS woes

Despite weaker-than-expected domestic economic data, AUD bond futures rallied hard with 3-year leading the move again.


Official data released this morning showed that the closely watched jobless rate was down from 3.6% in January to 3.5% in February. There was a strong uptick in full time employment, after a contraction in the previous month. Consumer inflation expectation for March, however, was down from 5.1% in February to 5%.


Dealers said the market has been in a complete risk-off mode as worries over a global bank crisis following the worrying situation of Credit Suisse as it became caught up in a crisis of confidence after the collapse of Silicon Valley Bank last week. Share price of the bank crashed by as much as 30% on Wednesday after its largest shareholder Saudi National Bank said it would not provide further support because of regulatory constraints. Market sentiment stays weak even though the bank now has secured USD54bn wroth of loan from the Swiss National Bank. In the US, players now shifted their interest rate outlook, and the market is not pricing a slightly better-than-even chance that policymakers will leave their benchmark lending rate in its current 4.5%-4.75% range at their upcoming meeting on March 21-22, compared to 25-50bps of hike that the market had predicted earlier on.


Such worries have been contagious, and the AUD rates market followed. 3-year bond future was up by 35-ticks intraday before being marked 24-ticks higher in mid-afternoon Sydney trading. The 3s/10s futures curve steepened up massively by 13.5bps to 51bps. 3-year ACGB yield was down by more than 25bps intraday.



3y swaps well offered, EFP wider in earlier trading

3-year swaps, which closed the previous day around 3.6%, was offered down to as much as below 3.4% in overnight trading. In domestic trading today it traded between 3.41% and 3.43% in the morning before last changing hands at 3.3575%. The earlier outperformance in 3-year ACGBs saw 3-year EFP widening by 5.5bps to 61bps. The spread was marked just marginally wider at around 55.75bps at time of writing.


10-year has been underperforming the short-end on the rally. A dealer reported receiving in 10-year at down to 6.5bps lower of 4.025% in domestic trading. 10-year EFP was 5.25bps wider in the morning before tightening marginally to 66.75bps.