AUD Swaps: Light 10y bid after confidence data; 2s/5s steepener

Steep path 21 Jun 2021
10y AUD swaps saw light paying after domestic consumer and business confidence data. ANZ re-iterated its interest in 2s/5s steepeners.

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  • Consumer and business confidence improve

  • ANZ reiterates 2s/5s steepener; Light 10y bid


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Consumer and business confidence improve

AUD bond futures were weaker after the Easter weekend, with flattening move led by 3-year as it tracked similar move in the USD rates market before the break which was in turn drive by the selloff in front-end ratees after US Fed’s Bullard said the central bank should keep hiking rates to fight high inflation. In addition, domestic data pointed to possibilities of another RBA interest rate hike, dampening demand for AUD rates.


Data released by Westpac earlier today showed that consumer confidence in April strengthened to 9.4% month-on-month from 0% in the previous month. The gauge by NAB showed business confidence in March improved from -4 to -1 although business condition worsened a tad from 17 to 16.


In mid-afternoon Sydney trading 3-year bond future was down 6-ticks at 97.16, and the 3s/10s futures curve was 1.5bps flatter at 38.5bps.



ANZ reiterates 2s/5s steepener; Light 10y bid

Domestic jobs data will be released later this week. The market expects unemployment rate to rise from 3.5% in February to 3.6% in March. However, ANZ said in a research piece released today that it expected another strong labour market print. The bank believes muted reaction to strong data following the RBA pause last week as there may be a high bar to another hike as of now. At the same time, any weakness though is likely to translate into more pricing of cuts into the RBA curve and lead to a steeper 2s/5s.


Flow wise, 10-year saw light paying at up to 5bps higher of 3.755% at the open but there were also flows down to around 3.72% after lunch break. It was last seen changing hands at 3.7425%. EFP there was 0.25bp tighter at 52bps at time of writing. 3- and 5-year EFPs were 0.5bp and 1.5bps narrower at 42.5bps and 58.5bps respectively.