ACGBS Little Changed, Current Account Deficit Widens

ACGBs (YM 0.0 & XM +0.05) are little changed today, the 10yr briefly dripped below 4% hitting a 3.99% before paring some gains. Australia's, Q2’s current account deficit widened significantly more than expected at $10.7b compared with $6.3b in Q1, which was revised up.

• In Q2, the current account deficit widened significantly to $10.7b, driven by a $5b drop in the merchandise trade surplus and a larger primary income deficit, with the net export contribution to GDP falling to 0.2 percentage points. Public demand contributed 0.4 percentage points to growth, up from 0.2 in Q1. Goods exports decreased by 4.4% due to weaker iron ore and coal prices, while services exports rose by 6%, supported by the education sector.
• Cash ACGBs curve has tightened today, yields are trading 0.5-1bps lower, the 2yr is -0.7bps at 3.716%, while the 20yr is -0.7bps at 4%. The 2s10s is trading towards the top out of the monthly ranges at 27bps after hitting a low of 2bps June 27th.
• Swaps are about 2-4bps lower with the curve flattening.
• The bills strip is flat to 2 ticks higher
• RBA-dated OIS pricing has firmed 2bps over the day with 18bps of cuts now priced into year-end, while looking through to July next year we have firmed 4-8bps.
• Tomorrow, focus will be on 2Q GDP data