AUD Swaps: Swaps given after Bullock named as the next RBA chief

• Michele Bullock becomes the first female RBA Governor

• Light 3-10y offers; EFPs out

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Michele Bullock becomes the first female RBA Governor

Australia’s treasurer announced earlier today that Michele Bullock would replace Philip Lowe and become the new governor of the RBA. She would be the first woman to lead central bank when Lowe’s seven-year term as the chief of the RBA expires on 17 September 2023.

The general opinion is that Bullock will be a relatively dovish head as compared with Lowe. This has prompted better demand for AUD rates, although the market has also been rallying due to the similar move in the USD rates market in overnight trading.

In mid-afternoon Sydney trading 3-year bond future was up 10-ticks at 96.15, and the 3s/10s futures curve was 2.5bps steeper at 12bps.

Light 3-10y offers; EFPs out

Market players have turned their attentions to the next RBA move. A swapper said Lowe will likely keep low profile towards the end of his appointment and so there will be smaller chance for a hike, not to mention any aggressive tightening. The source reckoned a gradual pricing out of near-term interest rate hike until some clearer messages from the new head.

Swappers have been less aggressive compared to cash bond players. A dealer reported sporadic receiving interest in 3-year, and it was traded 7bps lower of 4.205% around mid-day. 10-year traded briefly between 4.405% and 4.415%, down from previous close of 4.4725%. 5-year has been relatively busier with a couple of trades going through 4.265%-4.27% before lunch break. These compared to those traded around 4.335% near market close on Thursday.

EFPs were wider across the curve. 3-year was up 1.75bps at 33.75bps, 5-year up 0.5bp at 40bps and 10-year was up 0.25bp at 43.5bps.