AUD Swaps: Strong 2y sale ahead of RBA; Basis to head lower on a surprise hike

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Expectations about a pause saw a strong 2y ACGB sale. BNP believes basis to head lower on a surprise hike. 5y EFP tightens more.

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  • Strong 2y ACGB sale as RBA will likely pause

  • Basis to head lower on a surprise hike

  • 3-10y given; 5y EFP tightens more

  • New issues


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Strong 2y ACGB sale as RBA will likely pause

The AUD rates market was firmer today, despite only minor movement in US treasury yields in overnight trading. The demand for AUD rates was backed mainly by players readjusting their positions as now that the market believes the RBA will keep interest rate unchanged next Tuesday when it meets for the monetary policy meeting. This sentiment is also evidenced by today’s 2-year ACGB sale when the demand was exceptionally strong.


Earlier today, the AOFM sold AUD500m in 0.25% November 21, 2025 ACGBs at tender today, bringing the new size of the line to AUD39.2bn. Bid-to-cover was a whopping 7.63 times and average yield was 2.89%.



Basis to head lower on a surprise hike

With most market players betting for a pause next week, BNP Paribas would not rule out a surprise hike. It has taken a look at the potential reaction in the cross-currency basis market if there’s such scenario.


The team recalled that in 2022, there was a marked negative move in the basis on both the hawkish RBA surprise in May and the dovish one in October. It interpreted that the basis reacts negatively to any surprise or shock regardless of its direction. BNP suspected that such reaction could be related to the accumulated effect of QE, under the regime of ample liquidity that resembled the reaction of the USD/JPY basis. As such, BNP believes the AUD/USD basis could move in a negative direction if the central bank delivers a hike next Tuesday. 



3-10y given; 5y EFP tightens more

3-year swaps were offered down 2.5bps to 3.4175% soon after the strong auction. Receiving there then eased off after lunch break when it traded mostly between 3.425% and 3.435%. 10-year reacted by being traded 3.5bps lower, but was then further offered down to 3.9% after Sydney trading.


EFPs were mostly wider except for 5-year which has been on a tightening trend since late last week, down from levels around 76bps to below 68.5bps today. 3- and 10-year EFPs were 0.75bp and 0.5bp wider at 50.25bps and 60bps respectively.



New issues

  • Volkswagen Australia raised AUD250m via selling 4.95%, April 13, 2026 bonds.