AUD Swaps: Light 3-5y offers post-US Fed hike; EFPs in

Christmas hike 18 Oct 2021
AUD swaps have been offered after the 25bp US Fed hike and the dovish remarks. Trading activity has been light ahead of domestic inflation data.

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  • Bond futures firmer after 25bps US Fed hike

  • Light 3-5y offers; EFPs mostly narrower

  • New issues


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Bond futures firmer after 25bps US Fed hike

AUD bond futures have followed the USD rates market firmer, as the 25bps US Fed hike triggered a sharp rally in short-dated USTs in overnight trading. 2-year UST yield fell by more than 15bps and the curve bull steepened. The dovish tone was the main driver for the move. The board now said “some additional” rather than “ongoing” tightening ahead and it left players to believe that a cut is now within sight as the board seems to view the current rate as approaching the restrictive territory.


Elsewhere inflation in the UK surprisingly rebounded in February, driving renewed fears over more aggressive hikes to come, on top of a high chance of a 25bp hike later today. This has dampened strong rally in AUD rates.


In mid-afternoon Sydney trading 3-year bond future was up 8-ticks at 97.12, and the 3s/10s futures curve was 0.5bp flatter at 40bps.



Light 3-5y offers; EFPs mostly narrower

Trading in swaps has not been aggressive. A dealer reported light receiving in 3-year swaps at down to 10bps lower of 3.3725% in earlier trading as the market is still assessing how the RBA would react to recent turmoil in the banking sector in the US. In particular, market participants are watching closely domestic inflation and retail sales data which will be released next week. These would give a clearer picture about the next RBA policy move.


5-year saw some decent amount of offered-side flow at down to about 10bps lower of 3.5955% in the afternoon session. 10-year has been relatively busier with receiving between 3.895% and 3.915% on the day, down from previous close of around 3.99%.


EFPs were mostly tighter with some widening seen beyond the 10-year point. Key EFPs were marked as: 3-year down 1.25bps at 49.25bps, 5-year down 1.5bps at 71.75bps, 10-year down 0.5bp at 68.5bps.



New issues

  • IFC added AUD200m to its existing 1.25%, February 6, 2031 Kangaroo bond line to bring the new size to AUD775m.


  • New South Wales Treasury Corp increased the size of its existing bond lines as follows:


    • AUD250m to 2% March 8 2033 to AUD10.92bn. Priced at ACGBs + 61/75bps.

    • AUD500m to 4.75%, February 20, 2035 to AUD6.5bn.


  • Queensland Treasury Corp added AUD41m to its existing 2%, August 22, 2033 bonds to bring the new size to AUD3.15bn.


  • Royal Bank of Canada London branch self-led AUD30m in April 5, 2033 FRNs that pay AUD 3M BBSW + 240bps with quarterly put at par from April 2028.


  • Treasury Corp of Victoria upsized the following bond lines:


    • 0.5%, November 20, 2025 by AUD50m to AUD8.584bn at ACGBs + 14.35bps.

    • 3%, October 20, 2028 by AUD125m to AUD10.076bn at ACGBs + 53bps.

    • 4.25%, December 20, 2032 by AUD100m to AUD9.858bn at 75.25bps over ACGBs.

    • 4.75%, September 15, 2036 by AUD78.85m to AUD5.066bn at ACGBs + 75.8bps.