AUD Swaps: Good 3-10y offers ahead of RBNZ; 2y1y AUD/USD seen tighter

• Good 3-10y offers ahead of RBNZ

• 2y1y AUD/USD seen tighter

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Good 3-10y offers ahead of RBNZ

AUD bond futures rallied today, tracking similar move in the USD rates curve which was richer ahead of the US CPI and after China inflation data.

3-year bond future was up 8-ticks at 95.87 in mid-afternoon Sydney trading, and the 3s/10s futures curve was a basis point flatter at 6.5bps.

Players have been a tad cautious ahead of the RBNZ whose decision is due tomorrow, and the US inflation data which will be released the same day.

A dealer reported swap flow mostly around those liquid tenors on the day. 10-year, for example, traded 6-7bps lower in the morning session. Receiving interest intensified after lunch break and it was last traded down to 9.5bps lower of 4.6225%. 5-year, on the other hand, traded more than 10bps lower of 4.515% in the afternoon session. Further down the curve, 3-year went through between 4.465% and 4.47%, down from previous close of around 4.535%.

EFPs were mostly tighter with some widening seen at the superlong-end. Key EFPs were marked as follows: 3- and 5-year both down 1.25bps at 31bps and 39.75bps respectively, 10-year was down 0.5bp at 42.75bps

2y1y AUD/USD seen tighter

Elsewhere ANZ noticed AUD/USD rate spread in the 3y part of the curve is too wide. The bank did not recommend to put out a tactical trade, but it forecast the 2y1y AUD/USD spread to compress in a strategy note released earlier today.