A Touch Softer Than Settlement, Retail Sales Eyed

Post-Sydney dealing saw Aussie bond futures pare early overnight losses (derived from core EGB-led weakness and positive news surrounding the shortening of the COVID-related quarantine period for arrivals into China) as U.S. Tsys rallied through NY dealing, alongside pressure on the U.S. equity space (reasons for those moves were fleshed out earlier). Still, Aussie bond futures failed to move into positive territory and operate just below late overnight levels shortly after the Sydney re-open, with YM -2.0 and XM -4.0. Cash ACGBs run 2.0-4.5bp cheaper across the curve, with the 10- to 12-Year sector leading the way lower. The positives surrounding Chinese quarantine matters may have resulted in the widening of the AU/U.S. 10-Year yield spread, given Australia’s closer linkages with China. Bills sit 2-4bp cheaper through the reds vs. settlement.

• Retail sales data headlines the domestic docket on Wednesday. The market expects a +0.4% M/M print for May, versus +0.9% previously. There is a wide range of estimates, +1.0% to -1.0%. As we noted yesterday, consumer sentiment has fallen sharply in recent months, which may pose a downside risk to spending (although inflation provides some offset to that dynamic, at least in headline terms).