AUD Swaps: 10y ACGB/UST seen tighter; Early 5-10y bid

Tighten nut 10 Jun 2021
The AUD rates market extended losses today and there was some paying in 5-10y in earlier trading. 10-year ACGB/UST spread seen tighter.

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  • 10y ACGB/UST spread seen tighter; Early 5-10y bid

  • AOFM sells 2029 ACGBs

  • New issues – NAB 3y GBP FRNs


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10y ACGB/UST spread seen tighter; Early 5-10y bid

Losses in the USD rates market saw further selloff in AUD rates today. 3-year bond future was down 3-ticks at 96.89 in mid-afternoon Sydney trading, and the 3s/10s futures curve flattened out by 2.5bps to 34.5bps.


In a research piece released earlier today, ANZ noted recent widening of the 10-year ACGB/UST spread due to a combination of US banking concerns and the surprising RBA interest rate hike. However, the 5s/10s USTs steepened up relative to the ACGB curve over the last couple of weeks, and such steepness of the box may be enough to lead some offshore investors to preference ACGBs more than usual. This will limit the scope for further 10-year ACGB/UST widening.


US CPI data will be the key risk event in the very near term. ANZ believes that risks are skewed towards rates selling off as the market has already priced in a very low probability of another Fed hike, and so it will be difficult for the data to undershoot.


The bank therefore recommended 10-year ACGB/UST spread tighteners to capture the opportunities while avoid outright positions in USD rates and significant exposure to cross-market trades at the front-end due to risks related to the banking issues. It noted further that the trade will also benefit from the AOFM’s lower-than-expected borrowing task.


Flow wise, 10-year swaps traded up to 3.5bps higher at 4% in the  morning session. Paying there then faded after lunch break and it was last traded just a tad above previous close. 5-year went through mostly in a tight range around a basis point higher of 3.6375%.


EFPs were tighter across the curve. 3-year was down 1.5bps at 39.5bps, 5-year down 1.25bps at 53.75bps and 10-year down a basis point to 52bps.



AOFM sells 2029 ACGBs

The AOFM sold AUD800m in 3.25% April 21, 2029 ACGBs at tender today, bringing the new size of the line to AUD36.6bn. Bid-to-cover was 3.34 times and average yield was 3.2198%.



New issues – NAB 3y GBP FRNs

  • BNG Bank NV added AUD 40m to its existing  1.55%, February 19, 2032 bonds to bring the new size to AUD260m.


  • KfW upsized its existing 3.2% March 15, 2028 Kangaroo bonds by AUD100m to AUD800m. Priced at ACGBs + 52.25bps.


  • NAB raised GBP1.25bn via selling June 17, 2026 FRNs that pay GBP O/N SONION + 60bps.


  • Treasury Corp of Victoria increased the size of its existing bond lines as follows:


    • AUD245m to 4.75%, September 15, 2036 to AUD5.64bn at ACGBs + 75.8bps.

    • AUD219m to 2%, September 17, 2035 to AUD5.33bn at ACGBs + 58bps.

    • AUD136m to 1.5%, September 10, 2031 to AUD10.81bn.


  • UBS Australia branch raised AUD1.425bn via selling the following bonds:


    • AUD600m, May 12, 2026 paying AUD 3M BBSW + 130bps.

    • AUD650m, May 12, 2028 paying AUD 3M BBSW + 155bps.

    • AUD175m, 5%, May 12, 2028 at ASWs + 155bps.