AUSSIE BONDS: Steady Futures Start, 3yr Bond Yield Up 25bps This Week
Aussie bond futures are little changed in the first part of Friday dealings, outperforming a mostly softer US Tsy futures tone from Thursday trade. 3yr (YM) were close to 96.375. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support. For the 10yr (XM) we are up a touch to 95.685, largely keeping close to mid ranges of recent months. Downside support is evident at 95.51, the Sep 3 low. 95.90 is the Oct 17 on the topside.
- ACGB yields are little changed so far today, but lagging US Tsy yield gains from Thursday. The 3yr is around 3.61%, so in line with the RBA policy rate. The 10yr was last near 4.30%. The 3yr has risen close to 25bps so far this week, the 10yr close to 16bps, as the Q3 CPI pushed out RBA easing expectations (while the hawkish Fed cut was also impactful).
- AU-US 10yr is off recent highs, last around +20bps. The AU 3/10s curve is steady near +69bps.
- RBA pricing has close to a full cut priced for May/June next year. Only 5bps worth of easing is priced for the Dec meeting 2025.
- On the data front today we have Q3 PPI and Sep private credit figures. There is little chance these prints move bond market sentiment.
- Next week focus will be on the RBA outlook into 2026 (assuming a no change decision is delivered, which is now widely expected).
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AUSSIE BONDS: Cheaper With US Tsys, Dec-34 Supply Due
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.
BONDS: NZGBS: Unchanged As Markets Eye US Govt Shutdown
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.
JGB TECHS: (Z5) Bearish Trend Sequence Intact
- 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.
