AUSSIE BONDS: Steady Futures Start, 3yr Bond Yield Up 25bps This Week

ACGBs (YM -4.0 & XM -4.5) are weaker with attention on a possible US government shutdown. Nevertheless, Q3 ended on a mostly bullish note, as month- and quarter-end rebalancing added to expectations of Fed rate cuts.

• (Bloomberg) -- Australian home prices posted their strongest monthly gain in nearly two years, with an expanded government incentive for first home buyers expected to further intensify buyer demand at a time of already tight supply and declining borrowing costs.
• MNI RBA WATCH: Governor Michele Bullock declined to say whether the Reserve Bank of Australia retains an easing bias after the Board held the cash rate at 3.6% on Tuesday, stressing that future moves will depend on incoming data, with the current level still viewed as slightly restrictive.
• Cash ACGBs are 4-6bps cheaper with the AU-US 10-year yield differential at +21bps.
• The bills strip is -4 to -5 beyond the first contract.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in October is given a 35% probability, with a cumulative 11bps of easing priced by year-end.
• Today, the local calendar will also feature the S&P Global PMI Manufacturing (F).
• AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond.

In local morning trade, NZGBs are unchanged after US tsys finished with a modest twist-steepener.

• US Govt likely to shutdown at midnight tonight - the first time since late Dec 2018 when the government shutterd for 35 consecutive days.
• "SENATE TO VOTE THIS WEEKEND ON REOPENING GOVERNMENT", Bbg.
• "BLS will suspend all operations. Economic data that are scheduled to be released during the lapse will not be released. All active data collection activities for BLS surveys will cease. The BLS website will not be updated with new content or restored in the event of a technical failure during a lapse."
• MNI INTERVIEW: RBNZ To Eye 2% OCR Level - Ex Assistant Gov. The Reserve Bank of New Zealand is likely to need to cut the 3% Official Cash Rate by 100 basis points over the medium term to stabilise output and inflation following weaker-than-expected Q2 GDP data, a former assistant governor told MNI.
• NZ home-building approvals rose 5.8% m/m in August versus revised +5.3% in July
• Swap rates are little changed.
• RBNZ dated OIS pricing is little changed across meetings. 34bps of easing is priced for October, with a cumulative 62bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.50% May-35 bond.

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 135.85 @ 16:25 BST Sep 30
• SUP 1: 135.67 - Low Sep 26 
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

A bear threat in JGB futures remains present and the contract has pulled back from its recent highs. The latest sell-off has also resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. Key short-term resistance has been defined at 137.30, the Sep 8 high.