AUD Swaps: Light 5-10y offers after China RRR cut rumours

Rumours about China cutting its RRR in the 4Q have prompted some light receiving in 5-10y AUD swaps, followed by closing out of prior positions.

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  • Future curve bull-flattens after US data and China RRR cut rumours

  • Prior positions closed; Light 5-10y offers


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Future curve bull-flattens after US data and China RRR cut rumours

10-year AUD bond future has been leading a rally today following weaker-than-expected retail sales and industrial production data from the US in overnight trading. Rumours about the People’s Bank of China cutting the required reserve ratio in the last quarter of this calendar year has also prompted better appetite for safe-haven assets.


10-year bond future was down 6-ticks at 96.09 at midday, flattening the 3s/10s futures curve by 3.5bps to 6.5bps.



Prior positions closed; Light 5-10y offers

In swaps, a dealer noticed some light receiving in outright swaps, followed by some busy closing out of prior positions in the 5- to 10-year zone as players revised their outlook for the Australian economy if China lowers the RRR. “It would suggest our export demand from China will be affected,” another market player said.


10-year traded through 4.385% in early morning domestic trading, down from previous close of 4.41%. Trading in 5-year was subdued in the morning session. It then went through 2bps lower of 4.255% around mid-day


EFPs were mostly wider. 3-year was up a basis point at 35.5bps, 5-year down 0.5bp at 39.25bps and 10-year up 0.75bp higher at 45bps.