AUD Swaps: Bond futures trim losses after jobs data; 5-10y bid widens EFPs

Australian Dollars
AUD bond futures trimmed losses after higher-than-expected jobless rate in Australia. 5-10y swaps were bid, and EFPs were wider.

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  • Unemployment data enforces bets about an RBA pause

  • 5-10y bid widens EFPs

  • New issues


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Unemployment data enforces bets about an RBA pause

AUD bond futures opened weaker, on the back of better risk appetite as US President Joe Biden was positive about the ability to reach a US debt-ceiling deal. The USD rates market was sold off in overnight trading, and such sentiment extended to Asia at the open today.


3-year bond future was therefore down by 12-ticks in the morning session before trimming losses after domestic data.


Official data released around mid-day showed that unemployment in Australia was 3.7% in April. Economists had forecast it to stay unchanged at 3.5%. The move was contributed by a net loss of new jobs creation while participation rate was unchanged. Unemployment in Australia fell to its recent low of 3.4% in October before slowly climbing to 3.7% in January. The downtrend then resumed which had backed the case for more monetary tightening earlier this year.


Dealers said the data was an important indicator for the RBA. Players have become even more confident about a pause in the next meeting, although Consumer inflation expectation for May was 5.2%, unexpectedly higher than previous month of 4.6%.


3-year bond future erased all the earlier losses and was marked unchanged at 96.88 before being marked 5-ticks lower at 96.83 in mid-afternoon Sydney trading. The 3s/10s futures curve was 1.5bps flatter at 29.5bps.



5-10y bid widens EFPs

Surprisingly, there has not been significant amount of interest in 3-year swaps. A dealer explained that most players were ready for a pause next round, and they were cautious about a surprise from the other side of the fence which could have triggered some panic paying there.


10-year was quiet until the data. It was paid up 5bps to 4% intraday, easing to trade around 3.96% after lunch break. A trader said 10-year USD-AUD swap spread tightening by a few basis point has backed paying interest in 10-year AUD swaps.


5-year traded in several clips, backed by better paying there. It was last traded 3bps higher of 3.665%, after being traded in a tight range around 3.705% and 3.71% before mid-day.


EFPs were generally wider with 3- and 5-year up 1.5bps at 40.75bps and 51.5bps respectively. 10-year was up 1.25bps at 52.25bps.



New issues

  • Macquarie Group sold via TD Securities USD20m in May 24, 2028 FRNs that pay USD O/N SOFR + 160bps.


  • New South Wales Treasury Corp upsized its existing bond lines as follows:


      AUD300m to 1.75%, March 20, 2034 to AUD6.57bn at ACGBs + 63bps.

    • AUD to 1.5%, February 20, 2032 to AUD11.36bn at ACGBs + 33.1bps.