AUSSIE BONDS: AU-US 10Y Diff Extends Push Beyond Old Trading Range
Cash ACGBs are 2-4bps cheaper today, with the AU-US 10-year yield differential at +59bps.
- OIS pricing is firmer again, too. Currently, pricing shows zero probability of a 25bp rate cut in December. More notably, the market has shifted to assign a 103% probability of a 25bp hike by December 2026.
- Today’s move extends the recent firming in rate expectations — which began after the stronger-than-expected Monthly CPI on 26 November — to 9–30bps across the curve beyond December 2025, led by December 2026.
- Today’s move has extended the differential’s push above the ±30bps range that had persisted since November 2022.
- However, a simple regression of the 10-year yield differential against the AU–US 1-year forward 3-month swap rate (1Y3M) differential over the past two years suggests the current spread is around 7bps too wide relative to fair value.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: Bloomberg Finance LP / MNI
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CRYPTO: Bitcoin - Falls Back Toward Support, Demand Returns Around $105k
Bitcoin had a range overnight of $105 299k - $108 301k, Asia is currently trading around $107 100k, +0.25%. Bitcoin took another leg lower yesterday as the Crypto space seems to be struggling with a resurgent Dollar. It has never quite recovered from its crash on 10th & 11th October in what was described as the worst liquidation event in Crypto history after dropping almost 15%. The Bitcoin support area is between $95k-$108k and should provide those wanting to express a long a good opportunity to fade. A break below $90k-$95k is needed to signal a deeper correction is potentially underway, this scenario would make a few of those treasury companies holding bitcoin on their balance sheet nervous.
- Bloomberg is reporting that “without a clear macro anchor, liquidity still fragile and ETF inflows slowing, a break below $100,000 is a clear risk, one that could force the market to look for a new floor.”
Fig 1: Bitcoin spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
STIR: No Chance Of A Cut Today But Market Still Looks Expensive Longer-Term
Going into today’s RBA policy decision, RBA-dated OIS pricing implies almost no chance of an easing, with just a 3% probability assigned.
- As it currently stands, the OIS market has only a 75% chance of a 25bp cut by mid-2026.
- However, that may still be too aggressive as rising annual inflation tends to end easing cycles.
Figure 1: RBA-Dated OIS – Current Vs. Yesterday
Source: Bloomberg Finance LP / MNI
CHINA: Bond Futures Lower on Further Liquidity Withdrawal
- The relationship between liquidity withdrawal / injection and the direction of the bond market seems reasonably certain.
- A second day of withdrawals sees bond futures weaker, albeit marginally.
- The 10-Yr is lower by -0.03 at 108.62, maintaining it's position above all major moving averages as it veers away from being overbought on the 14-day Relative Strength Index.
- The 2-Yr is lower by -0.01 at 102.49 as it nears the 200-day EMA of 102.47 and continues to move below being overbought on the 14-day Relative Strength Index.
- The 10-Yr CGB is steady at 1.79%, looking to establish a new range below 1.80%
