AUD Swaps: Short into the RBA? 3-10y given; EFPs tighter across the curve

• ANZ favours short into the RBA

• Light 3-10y offers; EFPs tighter across the curve

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ANZ favours short into the RBA

Players in the Australian financial market have been extra cautious today, as they have split views on what the RBA would do when it concludes this month’s monetary policy meeting tomorrow.

ANZ said it expected a hike, though a close call, in a research piece released earlier today. It preferred to be short going into the RBA. “While off its lows, markets are only pricing 4bps of hikes into this week’s meeting and 10bps into the May meeting. Either way, this probability of a hike is not sufficiently reflected in market pricing,” As such, it recommended paying May OIS since there is some chance of a hawkish pause.

AUD bond futures have been swinging both ways around previous close. 10-year was up by 2.5-ticks in earlier trading, but down half a tick in late-afternoon domestic trading. The 3s/10s futures curve was 1.5bps flatter at 37bps.

Light 3-10y offers; EFPs tighter across the curve

Trading in swaps has been very subdued on the day. A dealer noticed 3-year trades in a tight range around 3.405%, or down about a basis point from previous close. 10-year traded between 3.865% and 3.875%, down 2-3bps from Friday’s close.

EFPs were tighter across the curve with 3-year down 1.75bps at 48.25bps, 5-year down 3.75bps at 65.5bps and 10-year down 2.5bps at 57.75bps