AUD Swaps: Terminal rate outlook; RBA seen easing in 2024; 10y bid; Box steeper

RBA Building
Several banks have revised their RBA outlook with some betting RBA easing from 2024. 10y saw paying interest and the EFP box steepened up a tad.

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  • GS revises down terminal rate

  • CBA sees 100bps worth of easing in 2024

  • BNPP stops out RBA OIS paid positions

  • 10y bid; Box a tad steeper

  • AOFM sells 2034 ACGBs


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GS revises down terminal rate

Banks are revising their stance for the next RBA move after the surprising RBA pause on Tuesday.


Goldman Sachs, for example, has revised down the terminal rate from 4.6% to 4.35%. The bank reckons the latest RBA decision has increased the risk that the tightening cycle is complete, but it leans towards the central bank being drawn into additional tightening over the coming months. At present, GS tips the RBA to resume hiking in November after third-quarter inflation data.



CBA sees 100bps worth of easing in 2024

CBA previously forecast peak rate at 4.35%, but now sees extended RBA pause at 4.1% as data between now and the next policy meeting would not suffice a shift in the RBA’s stance. CBA expects consumer demand to continue to soften amid the interest rate environment, the roll off of fixed rate mortgages and negative real household disposable income. The bank anticipates the RBA to begin easing in the first quarter of 2024, with 100bps worth of cuts over the year.



BNPP stops out RBA OIS paid positions

BNPP was caught off-guard too. The team noted in a strategy piece released not long after the RBA decision that the market now prices in cumulatively less than one hike, compared to one hike on Monday. This prompted BNPP to stop out its prior paid position in August RBA OIS.



10y bid; Box a tad steeper

The rally in the AUD rates market has failed to sustain after the selloff in the USD rates market in overnight trading.


In early-afternoon Sydney trading 3-year bond future was down 3-ticks at 96.23, after falling by 13-ticks at the open. The 3s/10s futures curve was 2.5bps steeper at 25.5bps.


Trading in 3-year swaps was subdued until a couple of trades in a tight range at a tad below 4.06% at mid-day, down about 1.25bps from previous close. 10-year turned busier towards mid-day. It traded mostly 2.5-3bps higher in the morning but was last seen changing hands 5bps higher at 4.435%.


5-year EFP widened out by 0.75bp to 44bps while 3- and 10-year were 1.25bps and 1bp tighter at 30.5bps and 40.75bps respectively. The 3s/10s EFP box steepened up a tad to just below 10.5bps.



AOFM sells 2034 ACGBs

The AOFM sold AUD700m in 3.75% May 21, 2034 ACGBs at tender today, bringing the new size of the line to AUD18.8bn. Bid-to-cover was 2.99 times and average yield was 4.0135%.