STIR: RBA Dated OIS Has Undergone A Significant Reassessment Since Last RBA Meeting

Regional Asian equities are lower today, as fewer projected US rate cuts are forecast by the markets. US yields continue to push higher, with the 10Y making fresh YTD highs after US job openings data suggested labor demand is stabilizing at an elevated level. Semiconductor names have edged lower on the back of Intel Corp reporting data on its foundry business, showing a decline in revenue and widening losses, while EV names are lower after Tesla missed delivery expectations by the biggest margin ever.

• In Japan equities opened lower across the board but have managed to erase some of those losses, the tech heavy Nikkei 225 is down 0.63%, while the Topix fares better now trading unchanged. Earlier Jibun Bank Japan PMI Composite was 51.7 down from the prior month of 52.3, while services PMI was 54.1 down from 54.9. Elsewhere the Yen is relatively stable at 151.57, but with a widening yield differential there could be further weakness to come, with traders eyeing the 152.00 level.
• South Korean equities gapped lower on the open, following moves from the US and regional peers, higher US yields alongside poor results from Intel and Tesla have also weighed on the market. SK reported foreign reserves rebounding last month after two straight months of declines, with investment gains offsetting the decrease in conversion value of non-dollar assets. The Kospi has broken below its recent lower range of 2,730 to trade at 2710. There could be further weakness to come and a retest 2,690 could be in play. The Kospi is down 1.40% in early trading.
• Taiwanese equities have opened trading lower while there have been reports of an earthquake that have rocked the entire island and knocked down some buildings, Japan has issued tsunami warnings. Elsewhere the USD/TWD has hit new YTD highs and now trades back at Nov 15th levels. Semiconductor names are the worst performing sector, with the Taiex down 0.45%.
• Australian equities are largely following other markets in the region lower on the back of higher yields and poor results from the US. Energy and Utility names are the only sectors in the green today, with Financials and Heath care names the worst performing. the ASX200 is down 1.22%.
• Elsewhere in SEA, New Zealand equities are lower, down about 1% as higher yields weigh on the market, while NZ Feb filled jobs rose 0.3% m/m, Singapore is also down about 1%, while Malaysia and Philippines trades mostly unchanged in early trading.

With the absence of domestic data, ACGBs (YM -6.0 & XM -6.5) are holding cheaper after dealing in relatively narrow ranges in today’s Sydney session.

• Following yesterday's twist-steepening, US tsys are offering limited direction for the local market. Cash US tsys have seen minimal movement during today's Asia-Pac session.
• Today’s May-41 bond was smoothly absorbed, with the weighted average yield printing 0.62bps through prevailing mids. Additionally, the cover ratio surged to 3.300x, a notable increase from the 2.100x recorded at the August 2023 auction.
• Despite waning positive sentiment towards longer-dated global bonds, today's auction bid seems to have found support from a higher outright yield and a steeper yield curve.
• Additionally, a favourable outlook on the RBA policy stance, following the removal of the explicit tightening bias in March, likely contributed to the increased demand.
• Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential 3bps higher at -22bps.
• Swap rates are 4-6bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -7.
• RBA-dated OIS pricing is flat to 5bps firmer across meetings. A cumulative 33bps of easing is priced by year-end.

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