AUD Swaps: 10y given after earlier bid; Hold on to OIS paid position

RBA
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Trading in AUD swaps has not been busy ahead of the RBA board meeting. ANZ recommended to hold on to RBA OIS paid position into the meeting.

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  • Keep RBA OIS paid position into RBA - ANZ

  • 10y given after earlier bid; Light 3y offers

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Keep RBA OIS paid position into RBA - ANZ

The sentiment in the AUD rates market has been positive on Monday, a day ahead of the RBA decision and despite of the losses in the USD rates market on Friday.

 

In mid-afternoon Sydney trading 3- and 10-year bond futures were both 6-ticks higher at 96.07 and 96.04 respectively, leaving the 3s/10s futures curve unchanged at 3bps.

 

A dealer said some players were preparing for another pause after last week’s lower-than-expected inflation data, and thus the demand for AUD rates. However, ANZ believes the much stronger retail sales and May’s solid labour force data should be enough to tip the RBA into hiking again. “The most likely alternative is a hawkish pause,” it said in a strategy piece released earlier today.

 

The team at ANZ therefore recommended to hold on the paid position in Aug-23 RBA OIS trade into tomorrow’s RBA meeting. “While it will be a close decision, risk/reward favours being short given where market pricing is setting,” it explained.

 

 

10y given after earlier bid; Light 3y offers

Trading in outright swaps has been very subdued on the day. A dealer said the mixed data from last week has put most players off and they preferred to wait until the RBA decision, although the majority of the market players have forecast a pause. A swapper noticed paying interest in 10-year in the morning session when swap rate there went up by about 2bps. However, it turned offered around mid-day when it traded at 3.28%, down from previous close of around 3.42%.

 

3-year traded briefly at 4.2675% in the afternoon session, after being quite dormant in the morning. This compared to Friday’s close of around 4.315%.

 

Key EFPs were mixed. 3-year was up 0.75bp at 33.5bps, 5-year down 0.5bp at 35bps and 10-year up marginally at 41.25bps.

 

 

New issues

  • AGI Finance issued via ANZ AUD170m July 10, 2030 FRNs that pay AUD 3M BBSW + 180bps.

     

  • Tasmanian Public Finance raised AUD500m via selling new January 10, 2029 FRNs that pay AUD 3M BBSW + 10bps.

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