AUD Swaps: EFPs squeezed as ACGBs sold off after First Republic

• AUD bond futures sold off as US banks rescue First Republic

• Westpac sees RBA pause as soon as April

• EFPs squeezed; 3y well bid; Cautious 5-10y

• AOFM sells 2034 ACGBs

• New issues

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AUD bond futures sold off as US banks rescue First Republic

AUD bond futures have followed the overnight selloff in the USD rates market, after a massive rally on the previous day which saw 3-year bond future up by more than 30-ticks.

On Thursday, US equities surged, and US treasury yields spiked with policy-sensitive 2-year yields shotting up 15.7bps to above 4.13% after news about 11 banks joining hands to rescue First Republic Bank. Players also revised their interest rate outlook as they feared the US Fed would be more comfortable about further tightening after ECB’s half a percentage point of interest rate hike. The market is now pricing in more than 80% of chance the US Fed would raise interest rate by 25bps next Wednesday.

In mid-afternoon Sydney trading 3-year bond future was down 19-ticks at 96.9, and the 3s/10s futures curve was 12bps flatter at 39.5bps.

Westpac sees RBA pause as soon as April

In Australia, players have split views on the RBA stance. Economists from IFM believe that the financial stability in Australia is sound and domestic banks would remain well capitalised and so the RBA would continue its tightening policy, or 25bps worth of increase next month. However, Westpac Banking Corp now sees an RBA pause as soon as April and revised down the terminal rate from 4.1% to 3.85%. Money markets, on the other hand, show that the current 3.6% cash rate as the peak of the RBA tightening cycle.

EFPs squeezed; 3y well bid; Cautious 5-10y

Swaps have been bid but outperforming a lot from the selloff in their underlying ACGBs. EFPs were squeezed tighter with 3-year down 4.25bps at 51.75bps, 5-year down 7.25bps at 76.25bps, and 10-year down 3.25bps at 63.75bps.

Trading in outright swaps has been a bit cautious following the volatilities in the previous few sessions. 3-year saw some closing out of prior positions, on top of some aggressive paying there in a tight range around 10bps higher of 3.545% on the day. 10-year has been subdued most of the day. Price action there saw 10-year swap rates up by about 5bps in the morning session, but actual trades only happened near market close when it went through about a basis point lower of 4.05%. 5-year only traded briefly in the morning at 6bps higher of 3.7925%

AOFM sells 2034 ACGBs

The AOFM sold AUD1bn in 3.75%, Mary 21, 2034 ACGBs to bring the new size to bring the new size to AUD16.6bn. Bid-to-cover was 3.1 times and average yield was 3.4741%.

New issues

• Auswide Bank Ltd issued via Laminar Capital AUD40m in March 17, 2026 FRNs that pay AUD 3M BBSW + 150bps.

   

• China Everbright Bank Sydney raised AUD165m via selling March 21, 2025 FRNs that pay AUD 3M BBSW + 100bps. Lead is ANZ.

   

• New South Wales Treasury Corp has upsized its existing bonds as follows:

   

  AUD225m to 2%, March 8, 2033 line to bring the new size to 10.2695bn. Priced at ACGBs + 61.75bps.
  • AUD50m to its existing 2%, March 20, 2031 at ACGBs + 60bps. The new size is now AUD10.05bn. Leads are ANZ CBA and UBS.

  • AUD50m to its 3%, February 20, 2030 to bring the new size to AUD1.49bn. Priced at ACGBs + 32bps and leads are ANZ, CBA and UBS.

   

• Rentenbank has increased the size of its existing 4.75%, May 6, 2026 Kangaroo bonds by AUD100m to bring the new size to AUD880m. Priced at 66.25bps over ACGBs and lead is Nomura.

   

• Treasury Corp of Victoria has upsized its existing 1.5%, November 20, 2030 bonds by AUD25m to AUD8.147bn.