AUD Swaps: Sporadic 5-10y bid as BOJ might tweak YCC

Eye storm hurricane 24 Jan 2023
AUD bond futures slumped and there has been sporadic paying in 5-10y AUD swaps, amid expectations that the BOJ will tweak its YCC policy.

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  • Bond futures sold off, curve steepens after US data and BOJ outlook

  • Sporadic 5-10y bid; 5y EFP wider

  • AOFM sold 2033 ACGBs


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Bond futures sold off, curve steepens after US data and BOJ outlook

AUD bond futures were sold off, despite weaker-than-expected domestic data.


Official data released earlier today showed that PPI in the second quarter was up 3.9% year-on-year, down from 5.2% in the first quarter. Retail sales contracted by 0.8% month-on-month in June, compared to 0.7% of growth in May. Economists had forecast it to stay unchanged.


The selloff was triggered by the slump in US treasuries in overnight trading.


US treasury yields rose sharply on Thursday following stronger-than-expected GDP data, weak demand at the 7-year auction and after news about the possibility of the BOJ widening the YCC band today. Data from Japan which indicated that inflation in Tokyo did not cool in July but stayed unchanged at 3.2% has prompted a more confident thought that the BOJ would need to tweak the YCC policy when the board concludes the MPM later today.


10-year bond future was down by 14.5-ticks intraday before being marked 12-ticks lower at 95.96 near mid-day. The 3s/10s futures curve steepened up by 5bps to 17bps.



Sporadic 5-10y bid; 5y EFP wider

In swaps there has been some decent amount of closing out of prior positions in 5- and 10-year. In outright trading, there was sporadic paying in 5-year at up to 9bps higher of 4.315%. 10-year saw light paying between 4.48% and 4.485%, up from previous close of 4.37%.


EFPs were mostly tighter except for 1.25bps worth of widening in 5-year to 43bps. 3- and 10-year were both 1.5bps tighter at 33.25bps and 43bps respectively.



AOFM sold 2033 ACGBs

The AOFM sold AUD700m in 4.5% April 21, 2033 ACGBs at tender today, bringing the new size of the line to AUD25.1bn. Bid-to-cover was 3.7 times and average yield was 4.0371%.