OIL: Crude Higher As Geopolitical Risk Premium Builds

AUD/USD is holding near 0.6350 in latest dealings. We got to highs of 0.6368 post the RBA decision, as the central bank cut rates by 25bps as expected, but then then the accompanying statement was cautious around further cuts. Pre RBA levels, we were just under 0.6340. 

• For AUD techs, not much has changed. The pair has cleared 0.6331, the Jan 24 high and a key short-term resistance. The breach highlights a stronger reversal and opens 0.6414, a Fibonacci retracement. Note that MA studies remain in a bear-mode position.
• Broader USD sentiment is positive, which may be limiting AUD upside. The BBDXY index remains in positive territory, up close to 0.20%. The A$ is outperforming on crosses though, up to 1.1120 for the AUD/NZD cross (+0.35%). AUD/JPY is up around 0.25%, the pair last near 96.50/55.
• AU-US 2yr swap spreads are little changed, last near -41bps. We ended Monday's session at -40bps. We are in from recent wides though of beyond -50bps from last week.
• Options markets aren't expecting AUD fireworks in the near term. The implied overnight range in AUD/USD is 0.6306-0.6392, with a 81.4% probability. This is little changed from pre-RBA levels.
• Coming up in a little over 30mins we have RBA Governor Bullock's press conference. 

ACGBs (YM -1.0 & XM -1.5) are slightly weaker after the RBA Decision. To summarise the statement:

• The RBA Board lowered the cash rate target to 4.10% as inflation continues to ease faster than expected. Underlying inflation fell to 3.2% in Q4 2023, with subdued private demand and easing wage pressures providing confidence in inflation’s downward trajectory. However, labour market data remains strong, suggesting ongoing tightness.
• The Board remains cautious about further policy easing amid domestic and global uncertainties. While inflation is expected to return to target, risks remain.
• The Board will continue to monitor economic conditions and remains committed to ensuring inflation sustainably reaches the 2–3% target range while maintaining price stability and full employment.
• Cash US tsys are 1-4bps cheaper, with a steepening bias, in today’s Asia-Pac session after yesterday’s holiday.
• Cash ACGBs are little changed on the day with the AU-US 10-year yield differential at -5bps.
• Swap rates are flat to 1bp higher on the day.
• The bills strip little changed.
• RBA-dated OIS pricing is slightly firmer after the RBA Decision across meetings today. 

The 20-year JGB auction delivered poor results across key metrics. The low price significantly underperformed dealer forecasts, which were set at 99.65 according to a Bloomberg poll. Additionally, the cover ratio declined to 3.0557x from 3.7891x in the previous auction, while the auction tail lengthened dramatically to 0.55 from 0.04. 

• As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 5bps higher than last month’s auction.
• However, the 10/20 yield curve had flattened over the past month, reaching its lowest point since mid-2023 and the 20-year JGB was at its most expensive valuation within the 10/20/30 butterfly since late 2022.
• This result goes against the strong performances observed in the 30-year JGB auction earlier this month.
• Post-auction, the 20-year JGB has traded 3bps cheaper, reflecting the auction's poor reception.