Bull-Steepener As Cash US Tsys Richen On Equity & USDJPY Weakness

ACGBs (YM +6.0 & XM +1.0) are richer and near Sydney session highs. With the domestic data calendar light, today’s local market movements appear to have been driven by offshore factors. First, cash US tsys are 2-4bps richer in today’s Asia-Pac session, with equity and USDJPY weakness as the catalysts.

• Secondly, the PBoC, in an unscheduled operation, announced that the 1-year MLF rate has been lowered to 2.3% from 2.5% prior. This was the first reduction in the rate since August last year. Today’s move was in line with cuts in the 7-day repo rate and the Loan prime rate earlier in the week.
• Cash ACGBs are 1-6bps richer, with the AU-US 10-year yield differential 4bps lower at +5bps. The current level for the differential places it near the middle of the +/- 30bps range it has traded in since November 2022.
• The swap curve has bull-steepened, with rates 2-6bps lower.
• The bills strip has bull-flattened, with pricing +1 to +7.
• RBA-dated OIS pricing is 2-7bps softer across meetings, with 2025 leading. Terminal rate expectations are 2bps lower at 4.40%.
• The local calendar is empty tomorrow, with the next key release being Building Approvals on Tuesday.