JGBS: Bull-Flattener After 30Y Supply, BoJ SoS Tomorrow

NZGBs closed modestly cheaper, with benchmark yields 2-3bps higher.

• The NZ-US and NZ-AU 10-year yield differentials closed slightly tighter. It is noteworthy, however, that the local market was closed at the time of the RBA decision. Tomorrow’s open is likely to reflect both post-RBA decision trading as well as any overnight fluctuations in US tsys.
• Swap rates closed 1-3bps higher, with the 2s10s curve steeper.
• Tomorrow, the local market will see the RBNZ Policy Decision. The sell-side consensus is for the RBNZ to remain on hold tomorrow, which is also consistent with market pricing.
• There are some sell-side forecasters looking for a rate cut tomorrow, whilst most of those who see the RBNZ on hold, see risks of further cuts as we progress through 2025. For this meeting, our own bias is for the central bank to hold policy rates steady. Recent inflation outcomes arguably provide the strongest signal that the RBNZ should hold pat at tomorrow's policy meeting. (See MNI RBNZ Preview here)
• RBNZ dated OIS pricing closed little changed across meetings. 3bps of easing is priced for this week's meeting, with a cumulative 30bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.

ACGBs (YM -12.0 & XM -8.0) are 3-6bps cheaper after the RBA surprised the market by leaving the cash rate at 3.85%. A 25bp rate cut today was given a 92% probability ahead of the decision by the market. 

• The RBA Board sees inflation risks as more balanced and the labour market as strong, but remains cautious due to uncertainty in demand and supply. It will await more data to confirm inflation is tracking toward 2.5%.
• Policy remains flexible to global developments. A 6–3 majority supported today’s decision, and future statements will include an unattributed record of votes. The Board remains focused on price stability and full employment.
• Cash ACGBs are 6-8bps cheaper after the decision with the AU-US 10-year yield differential at -11bps.
• The bills strip has shunted cheaper, with pricing -5 to -12 after the decison.
• RBA-dated OIS pricing is 11-23bps firmer across meetings after the decision. A cumulative 64bps of easing priced by year-end versus 75bps pre-RBA
• Tomorrow, the local calendar will see a speech by RBA Hauser.
• The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond tomorrow and A$1000mn of the 2.75% 21 November 2029 bond on Friday.

The RBA has left rates unchanged in a surprise decision. The AUD went into the Meeting trading around 0.6510 and quickly moved to 0.6550 on this as the market was almost fully priced for a cut.*RBA: JUDGED RISKS TO INFLATION HAVE BECOME ‘MORE BALANCED’ - BBG

• AUD/USD - 0.6545, +0.83%
• AUD/NZD - 1.0862, +0.32%
• EUR/AUD - 1.7950, +0.50%
• AUD/JPY - 95.50, +0.75%
• XPU5 - 8550, -0.26%
• EOY  OIS 1-10bps higher, bear steepener yields 1-5bps higher