AUSSIE BONDS: Subdued Start To Data-Light Session, 3/10 YC Flattest Since March

ACGBs (YM +1.0 & XM +2.0) are modestly stronger after US tsy futures closed firmer. 

• Looking ahead, Wednesday’s US data is limited to MBA Mortgage Applications and $42bn 10Y Note. Focus on multiple Fed speakers through the session: Williams, Paulson, Waller, Bostic, Miran and Collins.
• Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +25bps.
• The bills strip is little changed across contracts.
• RBA-dated OIS pricing is showing a 25bp rate cut in December at a 9% probability, with a cumulative 16bps of easing priced by mid-2026.
• Interestingly, AU-NZ 1-year forward 3-month swap (1Y3M) spread at 103bps is now at its highest level since 2012.
• Today, the local calendar will see Home Loan data alongside RBA Jones' Fireside Chat.
• However, the highlight of this week's AUS calendar will be Thursday's October jobs data. The unemployment rate rose 0.2pp to 4.5% in September.
• Last month's weak employment data triggered a solid ACGB rally, but those gains were more than fully reversed after the much hotter-than-expected Q3 CPI report.
• The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035bond today and A$800mn of the 1.75% 21 November 2032 bond on Friday.

Gold increased back above $4140 following concerning US ADP data but the move wasn’t held with it then falling to $4097.25. It has recovered somewhat to $4126.85 to be up 0.3% and 3.1% in November finding support from the weaker US dollar (BBDXY -0.1%). The market has around a 67% chance of a December Fed cut but gold’s response to the upcoming end of the US government shutdown signals that it thinks the delayed data will drive increased easing expectations when it is released.

• Advance ADP data suggested private sector job losses in the four weeks to 25 October but the providers noted the data is preliminary and could be revised.
• Our US analysts believe that the post-shutdown data schedule should be published next week but there is a risk that October CPI won’t be released. See their FAQ here.
• Bullion reached $4149.0 on Tuesday, remaining below initial resistance at $4161.4, 22 October high. The recent recovery in gold prices marks the end of the corrective phase which allowed the overbought condition to unwind. The bull trigger is at $4381.5. A decline below the 50-day EMA at $3890.0 would signal scope for a deeper retracement.
• Bloomberg reported gold ETF outflows in the 3 weeks to November 7 following 8 weeks of inflows.
• Silver rose to $51.252, remaining below initial resistance at $52.374, following the ADP data and then fell to $50.290. It then recovered to $51.221 to be up 1.4% on the day and 5.2% on the month. The trend remains bullish with the metal continuing to trade above the 50-day EMA at $46.484. 

AU–NZ 1-year forward 3-month swap (1Y3M) spread at 103bps is now at its highest level since 2012. 

• The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.

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