AUD Swaps: RBA seen pause again as CPI misses forecast; 3-10y given; Box steeper

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Australia's March CPI cooled and missed forecast, triggering renewed expectations about another RBA pause. Swaps were given and the box steepened up.

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  • CPI misses forecast; Futures curve bull-steepens as RBA seen pause again

  • 3-10y given on more confident rate pause outlook; Box steeper

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CPI misses forecast; Futures curve bull-steepens as RBA seen pause again

AUD bond futures rose by up to around 10bps in the morning after the sharp rally in the USD rates market on Tuesday.

 

In overnight trading, US treasury yields slumped by up to 15bps across the curve after disappointing earnings report from First Republic Bank and following news from Bloomberg that it has been exploring divesting up to USD100bn worth of long-dated mortgages and securities as part of the rescue plan.

 

The bond futures then spiked after domestic data.

 

Official data released earlier today showed that inflation in March was 6.3%, down from 6.8% in February and below economists’ expectation of 6.5%. The faster-than-expected cooling of inflation triggered thoughts that the RBA would extend its rate pause when it meets next Tuesday.

 

3-year bond future jumped and was up by 20-ticks soon after the data before being marked 18-ticks higher at 97.09 in mid-afternoon Sydney trading. The 3s/10s futures curve bull-steepened by 3.5bps to 39bps.

 

 

3-10y given on more confident rate pause outlook; Box steeper

3-year swaps were offered down in a double digit move after the inflation data. A dealer reported receiving at more than 10bps lower, which intensified after lunch break to trade almost 20bps lower of 3.36%.

 

The source said many players had already positioned themselves for another pause, and so trade flow has not been busy even after the data. “It was all about confirming their forecast rather than a shock,” the source explained.

 

10-year traded almost 10bps lower before the data, and was offered down 13bps of 3.84% near market close.

 

EFPs were mostly wider with 3-year up 0.75bp at 45bps, 5-year up 2.5bps at 57.75bps and 10-year up 2.25bps at 54bps. The 3s/10s EFP box steepened up further and was marked 0.5bp steeper at 9bps at time of writing.

 

 

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  • Korea Development Bank sold via Mizuho AUD70m in April 28, 2028 bonds that pay AUD 3M BBSW + 90.5bps.

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