Bear Flattening, Lowe Eyed

Tuesday provided a muted round of trade for ACGBs as participants look ahead to the impending Antipodean risk events, namely this evening’s dinner address from RBA Governor Lowe (on the topic of “Price Stability, the Supply Side and Prosperity”) and tomorrow’s monetary policy decision from the RBNZ.

• We don’t expect Lowe to offer much new when it comes to the outlook for monetary policy, after the RBA recently stepped down to 25bp increments re: cash rate hikes, while stressing that policy is not on a pre-set path.
• The flattening impulse from Monday’s U.S. Tsy trade held throughout the session, with a light bid in Tsys lending support, leaving YM -2.0 & +0.5 at the close, paring some of the losses observed in post-Sydney trade. Wider cash ACGB trade saw the major benchmarks running 3bp cheaper to 2bp richer late in the day, with the wings providing the extremes and a pivot observed around 12s.
• The 3-/10-Year EFP box was a little flatter, suggesting receiver side swap flows may have aided the bid in the longer end.
• Bills were +2 to -4 through the reds at the bell, as the strip twist steepened.
• Wednesday’s local docket will bring A$900mn of ACGB May-32 supply and flash PMI data from S&P Global.