AUSSIE BONDS: Richer After Declines In Confidence, Strong May-41 Auction

ACGBs (YM +3.5 & XM +5.0) are stronger and at session highs after today’s confidence data drop.

• Australia’s Westpac consumer sentiment slipped in February after the RBA hiked its key interest rate to tame inflation. The sentiment fell to 90.5 points, with pessimists outweighing optimists. A separate survey from NAB showed business conditions declined while confidence remained below its long-run average.
• Cash US tsys are 1-2bps richer, with a flattening bias, in today's Asia-Pac session.
• Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at +63bps.
• The latest ACGB May-41 supply auction continued the recent trend of firm pricing, with the weighted average yield printing 0.81bps through prevailing mids. Moreover, the cover ratio increased to 4.9500x from 3.2500x at the prior outing.
• The AOFM also plans to sell A$700mn of the 3.75% 21 April 2037 bond on Wednesday and A$1000mn of the 2.50% 21 May 2030 bond on Friday.
• The bills strip has bull-flattened, with pricing flat to +5.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 14% for March to 91% by June and 151% by December 2026.  
• Tomorrow, the local calendar will see Home Loan data alongside RBA's Hauser-Fireside Chat.

Bloomberg Finance LP