AUD Swaps: 3s/10s steepens from record low after RBA minutes

Steep 5 Jun 2020
3y AUD bond futures erased losses after the RBA minutes, and the 3s/10s swap curve steepened up from their record low. Westpac sold bonds in size.

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  • 3s/10s swaps steepen from record low after RBA minutes

  • New issues


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3s/10s swaps steepen from record low after RBA minutes

With the US market closed on the previous day, the RBA minutes for the June policy meeting became the key trade direction for players in Australia. According to the paper, RBA hinted further tightening needs as:


  • the economy still looks to be on narrow path to soft landing,

  • recent data suggested inflation risks have shifted to the upside,

  • unemployment rate is very low and the economy has very little capacity.


Moving forward, the central bank will be very data dependent, according to RBA Deputy Governor Michele Bullock. Market players took the minutes as less hawkish than they had expected. 3-year bond futures therefore erased earlier losses and marked 6-ticks higher around mid-day, but trimmed gains in the afternoon session to mark only 2-ticks higher at 96.07. 10-year bond future was down by 9-ticks in the morning before being marked 4.5-ticks lower at 95.985. The 3s/10s futures curve steepened up by 6.5bps to 8.5bps, after hitting its fresh low of 2bps on the previous day.


There has been some light trade flow in 10-year after the RBA minutes. A dealer reported paying at up to a basis point higher of 4.475% before lunch break. 10-year was then offered down to 4.4% intraday. 3-year saw mostly 2-way interest in the morning but was paid up more than 5bps higher at 3.39 in the afternoon. 3s/10s swaps, after flattening to their fresh low of around 12.5bps on the previous day, was 5.5bps steeper at 18bps at time of writing.


EFPs were mixed. 3-year was down half a basis point to just below 33.5bps, 5-year up 2.75bps at 38.75bps and 10-year up 0.5bp to 43.5bps. The EFP box steepened up by 0.5bp to 10.25bps.



New issues

  • AMP Bank has mandated Barrenjoey and CBA for a potential 3-year AUD-denominated floating rate note offer.


  • Credit Agricole sold via itself AUD62m in zero coupon notes with annual call options from June 2033.


  • Standard Chartered Bank self-led AUD1.72m in July 3, 2026 stepped notes that pays 3.7% in the first year, then steps up 50bps every year.


  • Treasury Corp of Victoria upsized the following bonds:


    • AUD25m to 5.5% November 17, 2026 to bring the new size to AUD10.68bn.

    • AUD43.4m to 1.25%, November 19, 2027. The new size is now AUD8.18bn.


  • Westpac self-led AUD2.9bn worth of bonds as follows:


    • AUD1.1bn, June 23, 2038, paying 6.934% till the first quarterly call at par in June 2033, then 260bps over AUD 3M BBSW.

    • AUD300m, June 23, 2033, paying 6.491 till the first quarterly call at par in June 2028, then AUD 3M BBSW + 230bps.

    • AUD1.5bn, June 23, 2033 paying AUD 3M BBSW + 230bps with quarterly call at par from June 2028.