AUD Swaps: Bond futures sold off after China data; 3-10y bid; Box seen steeper

Flat as a pancake
AUD bond futures were sold off further and 3-10y swaps were bid after strong China data. EFP box is now too flat and may attract steepener interest.

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  • Bond future sold off further after strong China data

  • 3-10y bid; EFP box seen steeper

  • New issues


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Bond future sold off further after strong China data

AUD bond futures were weaker in the morning, tracking the losses in the USD rates market which was in turn driven by players pricing in a higher chance of further US Fed interest rate hike. Bond futures sold off further after lunch break after stronger-than-expected China data.


Earlier today, official data released from China showed that the country’s first quarter GDP was up 4.5% year-on-year, compared to 2.9% in the previous quarter and economists’ expectations of 4% of growth. Retail sales in March was up 5.8% on an annual basis, up from 3.5% in February and consensus of 3.7%. Surveyed jobless rate in the same month was down from 5.6% in February to 5.3%.


A strong set of data from China indicated stronger demand for Australia’s exports which would eventually drive inflation and thus more RBA hikes. Indeed, the minutes of April meeting released just before China data saw RBA discussing a 25bp hike before finally deciding a pause in April. The central bank also stressed that it might need to hike rates in future meetings amid accelerating population and wage growth.


3-year bond future was therefore down by 14-ticks intraday before being marked 12-ticks lower at 96.92. The 3s/10s futures curve was a basis point flatter at 40bps.



3-10y bid; EFP box seen steeper

The swap market mainly saw reaction in 3- and 10-year, with more obvious paying interest after lunch break.


A dealer said expectations about a strong economic growth after China data have backed paying in 10-year at up to 4.05% in the afternoon session, or more than 8.5bps higher from previous close. 3-year was subdued in the morning until paying emerged after midday. It was last traded 12.5bps higher of 3.55%, after being traded in a tight range between 3.485% and 3.495% most of the afternoon session.


EFPs were wider across the curve with 3-year up 1.5bps at 47.5bps, 5-year up 3bps at 64.75 and 10-year up 1.5bps at 55.75bps.


The 3s/10s EFP box was marginally flatter at 8.25bps, or the flattest since the beginning of the year. A trader said the box is currently too flat and would see a steepening move very soon. Indeed, ANZ also recently noted opportunities in EFP box steepeners. The bank said the RBA pause might lead to a dip in corporate hedging flows on the view that the cycle is over. At the same time, with minimal cuts priced into the curve the value in paying 3-year for hedgers of fixed rate risk would be relatively low. ANZ also doubted there would be a lot of receiving flows at the 10-year part of the curve amid lack of demand from potential Kangaroo and Japanese issuers due to the unattractiveness on a cross-market basis. These would all contribute to a steeper EFP box.



New issues

  • Canadian Imperial Bank of Commerce Sydney branch raised AUD1.5bn via selling April 21, 2026 covered FRNs that pay AUD 3M BBSW + 80bps.


  • Korea Development Bank sold via SG AUD30m in 5.05% April 26, 2033 bonds.


  • Queensland Treasury Corp added AUD50m to its existing 4.5%, March 9, 2033 bond line to bring the new size to AUD3.3bn. Priced at 62.6bps over ACGBs.


  • New South Wales Treasury Corp upsized its existing 2%, March 8, 2033 line by AUD50m to AUD11.57bn. Priced at 61.75bps over ACGBs.