AUSSIE BONDS: ACGB Jun-31 Auction Goes Smoothly But With Less Demand

The USD/CNY fix printed at 7.2005, versus a BBG market consensus of 7.2147. 

• This was little changed versus yesterday's outcome of 7.2008. Much of the adjustment came via the lower fixing error, which fell to -142pips and is the narrowest outcome since Nov last year.
• USD/CNH is back close to opening levels near 7.2100.
• Earlier we dipped to 7.1892 on headlines of US-China trade talks, but fresh monetary policy stimulus announced by the PBoC this morning (RRR cut and lower 7-day repo by 10bys) has provided an offset. 

• CHINA PBOC CONDUCTS CNY195.5 BLN VIA 7-DAY REVERSE REPO WEDS

The latest ACGB April 2037 auction attracted strong demand, with the weighted average yield printing 0.50bps through prevailing mid-yields, according to Yieldbroker — continuing the recent trend of firm pricing across ACGB auctions.

• The cover ratio rose sharply to 4.6400x from 3.6688x at the previous auction, indicating stronger investor participation. This was further supported by a notable decrease in the number of successful bidders.
• As noted in our preview, the outright yield was around 5bps lower than at the prior auction and remained approximately 40bps below the November 2024 peak.
• Bidding strength came despite recent deterioration in sentiment toward longer-dated global bonds, as consistently strong US economic data has delayed expectations for Federal Reserve rate cuts.
• The 3s/10s yield curve was roughly 40bps steeper than at the last auction, though still about 20bps below its recent peak — potentially tempering demand for duration.
• In early post-auction trading, both XM futures and the bond line have richened by around 1bp.