AUSSIE BONDS: AUCTION PREVIEW: ACGB Dec-34 Supply Due
May-14 00:16
The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 3.50% 21 December 2034 bond, issue #TB168. The line was last sold on 16 April 2025 for A$1000bn. The last sale drew an average yield of 4.2878%, at a high yield of 4.2900% and was covered 3.9900x. There were 38 bidders, 17 of which were successful and 10 were allocated in full. The amount allotted at the highest yield as a percentage of the amount bid at that yield was 50%.
- This week's ACGB supply is larger than the recent average weekly issuance of $1500mn, with A$800mn of the 2.50% 21 May 2030 bond to be issued on Friday.
- According to the Budget 2025-26 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds by tender is expected to be between $2 billion and $3 billion (additional issuance by syndication may be considered).
- For 2024-25, issuance of Treasury Bonds has been revised to around $100 billion, including around $2 billion of Green Treasury Bonds. Treasury Indexed Bond issuance will be around $3 billion.
- The previous round of ACGB Dec-34 supply saw the recent run of strong pricing at ACGB auctions continue with the weighted average yield printing through prevailing mids. Moreover, the cover ratio improved, rising to 3.9900x from 3.7250x.
- Several factors likely impacted demand. While the outright yield was around 20bps lower than the level at the previous auction, the 3/10 yield curve was at its steepest since December 2021.
- Results are due at 0200 BST / 1100 AEST.
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US TSYS: Cash Bonds Mostly Richer In Today's Asia-Pac Session
Apr-14 00:15
TYM5 is dealing at 109-28+, +0-05 from closing levels in today's Asia-Pac session.
- The 10-year yield closed around 4.495 on Friday night and has opened just below at 4.48% this morning in Asia.
- The 10-year yield rose almost 50bps in 5 days, one of the biggest moves in that number of days since 1998.
- Ultimately though it comes down to the market pricing in a large number of cuts and the Fed consistently saying it was worried about inflation due to the President’s policies.
- Bianco Research made a good point over the weekend. “The market understands Powell is going “Volcker” and is not going to cut rates despite a weakening economy”. (per X via BBG)
- He wants to be remembered as central bank royalty like Paul Volker who was known for his decisive and aggressive stance to curb inflation, rather than Arthur Burns who was criticized for being too slow and hesitant to raise rates.
- Yields will continue to find sellers on dips. Expect any move back towards the 4.25-4.35% area to find supply.
- The key resistance back towards 4.8-5% is the first target. The market will be watching for more stress in the leveraged basis-trade unwind and any signs of sovereign selling.
JGBS: Cash Bond Bear-Steepener
Apr-14 00:06
JGB futures are stronger, +3 compared to settlement levels, but weaker than Friday's post-Tokyo trade closing level.
- US 10-year futures (TYM5) are dealing at 109-29, +0-06 from closing levels in today's Asia-Pac session.
- The big news over the weekend was President Trump's exemptions on smartphones, computers, and other electronics, though this has been downplayed over the weekend as a procedural step. They will be looking at the whole electronic supply chain.
- On Friday, 10-year yields ranged from 4.5270% to 4.5860%, closing around 4.49%. The 10-year yield rose almost 50bps in 5 days, one of the biggest moves over that number of days since 1998. Several catalysts are being pointed at: hedge funds, basis - traders being squeezed out, and sovereign selling of treasuries as a negotiation tool. These have all added to the pressure.
- There had been some speculation that the BoJ had been a seller of treasuries adding to the messy price action. The LDP policy chief has come out saying its US treasury holdings will not be used as leverage in tariff talks scheduled for April 17.
- Cash JGBs are showing a bear-steepener in early Tokyo trade.
- Today, the local calendar will see Industrial Production and Capacity Utilization data.
- BoJ Governor Ueda is due in parliament at 1109 JT.
AUSSIE BONDS: Cheaper Start To Week, Uncertainty Over Tariffs on Electronics
Apr-13 23:56
ACGBs (YM -8.0 & XM -4.5) are weaker following a heavy end to last week for US tsys. On Friday, US tsys finished cheaper, with curves flatter.
- The big news over the weekend was President Trump's exemptions on smartphones, computers, and other electronics, though this has been downplayed over the weekend as a procedural step. They will be looking at the whole electronic supply chain.
- US 10-year futures (TYM5) are dealing at 109-26, +0-03 from closing levels in today's Asia-Pac session.
- On Friday, US tsy futures moved off lows after lower-than-expected PPI (prior up-revised slightly). UofM sentiment was lower than expected but anticipated inflation expectations were higher.
- Cash ACGBs are 5-8bps cheaper with the AU-US 10-year yield differential at -5bps.
- Swap rates are 3-9bps higher, with the 3s10s curve steeper.
- The bills strip has bear-steepened, with pricing -3 to -9.
- RBA-dated OIS pricing is 2-13bps firmer across meetings today. A 50bp rate cut in May is given a 39% probability, with a cumulative 116bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Today, the local calendar will be empty, ahead of the release of the RBA Minutes for the April Meeting tomorrow.
