AUD Swaps: Curve bear-flattens after minimum wage boost; NIB new 2028 Kanga

Computer lines code 30 Jan 2023
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Australia will hike minimum wage by a good margin next month, triggering a bear-flattening move in the AUD rates curve. NIB sold a new 5y Kanga.

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  • 3s/10s bear-flattens after national minimum wage boost

  • AOFM sells 2026 ACGBs

  • New issues – Nordic Investment Bank new 2028 Kanga

 

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3s/10s bear-flattens after national minimum wage boost

AUD bond futures were firmer in the morning, tracking but underperforming the rally in the USD rates market in overnight trading. 3-year bond future then began to lead a selloff around mid-day amid renewed worries over an earlier resumption of an RBA hike as soon as this month, which was triggered by an upward adjustment of the national minimum wage by 5.75% from July 1.

 

ANZ already adjusted its forecast of the terminal RBA rate from 4.1% to 4.35% last week. RBC, on the other hand, made a stronger revision after news about the national wage. It now expects terminal to be 4.35% by two more 25bp hikes in June and July, up from previous forecast of 3.85%.

 

3-year bond future was down by 7-ticks at 96.55 in mid-afternoon Sydney trading. The 3s/10s futures curve was 3.5bps flatter at 20.5bps, the flattest since mid-September.

 

Earlier gains in the underlying ACGBs saw 3-year swaps traded down more than 4bps in the morning session. At time of writing 3-year was however marked 4.5bps higher of 3.805%. 3s/10s swaps bear-flattened by 2.75bps to 33bps, or the flattest since late-September. Slightly up the curve, 5-year went through a basis point lower in the morning before bid-side flow at 2.25bps higher of 4.4075% after the minimum wage announcement.

 

EFPs were mixed but key ones were tighter. 3-year was down 0.5bp at 36bps, 5-year down 1.5bps at 44.5bps and 10-year down 0.25bp at 48.75bps.

 

 

AOFM sells 2026 ACGBs

The AOFM sold AUD500m in 4.25% April 21, 2026 ACGBs at tender today, bringing the new size of the line to AUD13.8bn. Bid-to-cover was 5.13 times and average yield was 3.353%.

 

 

New issues – Nordic Investment Bank new 2028 Kanga

  • Nordic Investment Bank issued via DB and JPM AUD300m new 4.1%, June 8, 2028 Kangaroo bonds at ASWs + 40bps.

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