AUD Swaps: More selloff in AUD rates; 1y/1y1y seen flatter

Rolled flat road 21 Jun 2021
The AUD rates market was sold off again with paying seen in the 3-10y area. ANZ has looked at the opportunities of 1y/1y1y flattener.

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  • 1y/1y1y seen flattener – ANZ

  • AOFM sells 2040 linkers

  • New issues


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1y/1y1y seen flattener - ANZ

The AUD rates market continued to follow the global move, and was weaker after the selloff in the USD rates market, which was in turn driven by worries over the outcome of debt-ceiling negotiations.


3-year bond future was down 3- to 5-ticks in the morning, and fell further in the afternoon session. In mid-afternoon Sydney trading it was down by 8-ticks at 96.62, and the 3s/10s futures curve was 1.5bps flatter at 27.5bps.


In a strategy piece released earlier today, ANZ noticed recent bear-flattening of 3s/10s futures curve, and maintained its bias for a flatter AUD curve especially at the very front-end. Indeed, the curve has already flattened from levels around 41.5bps in mid-April. “If global risk sentiment continues to improve, terminal RBA pricing could rise further…this makes the two-year part of the curve particularly vulnerable to any downside data surprises or risk-off event,” it explained in the piece. ANZ feels that receiving 1y1y IRS looks attractive on a relative value basis. It noted that 1y/1y1y has steepened recently and the belly on the 1y/1y1y/2y1y fly had underperformed. However, the team doubted such move to sustain, and recommended 1y/1y1y flattener.


ANZ also believes that AUD rates haver more room to sell off if US debt ceiling negotiations are resolved prior the X date, and recommended holding on 10-year ACGB-UST spread tightener as a soft way of positioning for a debt ceiling resolution.


Flow wise, swaps have been bid with stronger paying interest after lunch break. 3-year traded up to 3.75% near market close, up from previous close of 3.68%. 10-year traded in several clips, from levels around 4.1% to 4.135% in the afternoon session. These compared to yesterday’s close of around 4.085%. 5-year was last seen changing hands 5.5bps higher of 3.85%, after being traded in a tight range around 3.82% in earlier trading.


EFPs were tighter at the two extreme ends. Key EPFs were marked as: 3-year down marginally at just below 38.5bps, 5-year up 0.25bp at 49.25bps and 10-year up 0.5bp at 50bps.



AOFM sells 2040 linkers

The AOFM sold AUD315m in 1.25% August 21, 2040 linkers at tender today, bringing the new size of the line to AUD13.8bn. Bid-to-cover was 2.27 times and average yield was 1.5369%.



New issues

  • Credit Agricole has launched a new 5-year fixed and/or floating rate senior preferred Kangaroo bond offer off its AUD debt issuance program. Initial price guidance is +165bps area and final pricing is expected later today. Leads are CBA, NAB, Nomura, TD Securities and itself.


  • Westpac Banking Corp sold via UBS CHF290m in 2.0125% June 13, 2030 bonds at mid-swaps + 20bps.