AUD Swaps: Longs given after lower-than-expected CPI; EFPs in

Chart up line Oct 2022
CPI came in lower than the market had expected, prompting receiving at the longer-end of the curve. EFPs were mostly tighter.

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  • Futures curve steeper after lower-than-expected inflation data

  • Longs offered; EFPs in

  • New issues


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Futures curve steeper after lower-than-expected inflation data

Domestic inflation data was a surprise. It was 5.6% in May, down from 6.8% in April and even below economists’ forecast of 6.1%. It was also the lowest since April last year, offering a strong evidence that recent RBA’s interest rate hikes have started to work to fight against inflation.


Therefore, despite losses in the USD rates market in overnight trading, the AUD rates market rallied as players priced in lower chance of further tightening when the RBA meets next Tuesday.


In mid-afternoon Sydney trading 3-year bond futures was up 4-ticks at 96.17, and the 3s/10s futures curve was half a basis point steeper at 6bps.



Longs offered; EFPs in

Long-dated swap rates dived almost immediately after the data, but eventually traded a few basis points lower. A dealer reported relatively busier flow at the longer end. 10-year, for example, traded down to almost 6bps lower of 4.305% after lunch break, after being traded in a tight range around 4.345% in the morning and right after the release of the CPI data. Price action in 30-year saw swap rate there down to below 4% but it only traded briefly at 3bps lower of 4.05%. However, the swap curve is still inverted with rates from the 30-year point still lower than those at the front-end.


EFPs were tighter except in 2-year where it was half a basis point wider at 53.25bps. Other key EFPs were marked as: 3-year down marginally at just below 34.5bps, 5-year down 1bp to 37bps, 10-year down 0.75bp to 41.75bps.



New issues

  • NAB added AUD200m to its existing July 22, 2024 FRNs to bring the new size to AUD800m. The deal pays AUD 3M BBSW + 50bps.