AUD Swaps: 3-10y bid as RBA seen hiking tomorrow; IFC, KfW Kanga taps

• Light 3-10y bid as RBA seen tightening further

• New issues – IFC, KfW Kanga taps

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Light 3-10y bid as RBA seen tightening further

AUD bond futures have followed the US treasury market weaker, after latest jobs data there that showed a surge in nonfarm payrolls although jobless rate increased from 3.4% to above expectation of 3.7%. Players paid more attention to the unexpectedly spike in new jobs creation, and raised their bet on a US Fed interest rate hike. This was indicated by a 13bps jump in 2-year UST yield on Friday.

In mid-afternoon Sydney trading 3-year bond future was down 11-ticks at 96.46. The 3s/10s futures curve was 1.5bps flatter at 20.5bps, or the flattest since mid-September when it flattened out to 15.5bps.

Players in Australia were generally biased towards selling AUD rates into the RBA decision due tomorrow. A market participant said he would not expect another pause tomorrow especially after an accelerated inflation in May and despite higher-than-expected jobless rate in April. The recent raise in minimum wage is also a key indicator that the central bank would prefer further tightening.

Swap flow has been very light. 3-year traded briefly before lunch break at around 3.88%, up from those traded around 3.8% near market close on Friday. There have been sporadic activities in 10-year too. It went through 4.215%-4.22% in the morning, and was last seen changing hands at 4.23%. These compared to previous close or around 4.15%.

EFPs were wider at the mid-sector and tighter otherwise. 3-year was down 1.75bps at 34.5bps, 5-year up 0.75bp at 44.75bps and 10-year down marginally at 47.75bps.

New issues – IFC, KfW Kanga taps

• IFC has upsized its 1.25% February 6, 2031 Kangaroo bonds by AUD50m to AUD900m. Lead is RBC.

   

• KfW has added AUD200m to its existing 3.2% September 11, 2026 Kangaroo bond line to bring the new size to AUD2.8bn. Priced at ACGBs + 66bps and lead is RBC.