AUD Swaps: Light 3-10y bid; Box steepens further; Telstra 8y EUR bonds

• Light 3-10y bid; EFP box steepens further

• New issues – Telstra Group 8y EUR bonds

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Light 3-10y bid; EFP box steepens further

AUD bond futures were weaker, tracking the losses in the USD rates market as players re-considered a high chance of another US Fed 25bp hike next week. The sharp rally in the AUD rates market on the previous day following faster-than-expected cooling of domestic inflation has also prompted some profit taking.

In mid-afternoon Sydney trading 3- and 10-year bond futures were 4- and 5.5-ticks lower at 97.04 and 96.64 respectively, and the 3s/10s futures curve was 1.5bps steeper at 40bps.

Swappers stayed cautious and most of them were on the sidelines ahead of the decisions of the RBA and a couple of key central banks in the next few days, including Bank of Japan tomorrow and the US Fed late next week.

Nevertheless, there was some paying in 2-year before mid-day at up to 3.505%, up about 3bps from previous close. 10-year traded in several clips and mostly in a tight range around 3.885%, or up around 5bps from Wednesday’s close.

EFPs were mixed with 3-year down 0.5bp at 44.75bps, 5-year up 0.5bp at 61.25bps and 10-year down 0.25bp at 53.75bps. The 3s/10s EFP box steepened up further by 0.25bp to 9.25bps.

New issues – Telstra Group 8y EUR bonds

• New South Wales Treasury Corp sold a new AUD2.5bn 4.25% February 20, 2036 bond.

   

• Telstra Group sold EUR500m in 3.75% May 4, 2031 bonds at +146.7bps.

   

• West Australia Treasury Corp upsized its existing 3.25% July 20, 2028 bonds by AUD100m to AUD3.82bn.