At Cheaps, RBA Minutes Flag Tightening Risk

ACGBs sit at or near session cheaps (YM -13.0 & XM -11.0) after the RBA Minutes for April make a special point that “monetary policy may need to be tightened at subsequent meetings”. ACGBs were cheaper ahead of the Minutes in sympathy with the weaker lead from US Tsys in NY trade but then added 3-6bp to the cheapening in the post-Minutes trade.

• In the Minutes, the RBA discussed a 25bp hike or pausing but “on balance” decided to leave rates unchanged to have more time to assess the economic outlook and impact of the significant tightening to date.
• Cash ACGBs are 11-12bp cheaper with the AU-US 10-year yield differential +2bp at -11bp.
• Swap rates are 12-14bp higher with the curve 2bp flatter and EFPs 1-2bp wider.
• Bills strip is steeper with pricing -8 to -17.
• RBA dated OIS pricing is 6-10bp firmer for meetings beyond July. A 32% chance of a 25bp hike in May is priced with a cumulative 18bp of tightening priced by August.
• The AOFM announced the launch via syndication of the new Dec-34 bond today with expected pricing tomorrow.
• With the local calendar light until next week, the local market will remain guided by US Tsys which have cheapened for three consecutive sessions.