Bear Flattening, Westpac Look For 40bp June RBA Liftoff

Cross-market spill over allowed the space to extend on its overnight weakness during the early rounds of Sydney dealing, with breaks below previous cycle lows in YM & XM generating fresh rounds of selling later in the day. YM -10.0 & XM -5.0 at typing.

• Note that Westpac chief economist Bill Evans has adjusted his RBA call, now looking for a 40bp cash rate lift off in June, which triggered further weakness in the space.
• Bear flattening was already in play before that view was provided, with the curve off session flats at typing.
• Bills run 15-20 ticks lower through the reds as a result. Note that today’s 3-month BBSW fixing set ~5.2bp higher. There is a near 60bp spread between the current 3-month BBSW fixing and the implied rate observed in IRM2.
• The latest round of S&P flash PMI data revealed slightly faster than expected rates of expansion across the 3 headline metrics, will the details revealing familiar stories when it comes to the Australian labour market and inflation.
• A quick reminder that ACGB markets will be closed on Monday as Australia observes the ANZAC day holiday. The AOFM’s weekly issuance schedule is light as a result, with A$1.0bn of ACGB Sep-26 providing the only round of coupon bearing supply next week.