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Cheaper Ahead Of RBA Decision On Tuesday, Awaiting US PCE Deflator

AUSSIE BONDS

ACGBs are currently trading weaker (YM -10.0 & XM -10.5), nearing the session lows observed in Sydney. Market participants are eagerly awaiting the release of US PCE deflator data later today. The market consensus expects the headline deflator to show a monthly increase of +0.1%, indicating a slowdown in inflationary pressures. However, the Core PCE deflator, which is closely watched by the Fed, is anticipated to register a monthly increase of +0.3% following the +0.4% reading in April. The annual core PCE deflator is expected to remain unchanged at +4.7%.

  • Cash ACGBs are 9-10bp cheaper with the AU-US 10-year yield differential unchanged at +16bp.
  • Swap rates are 9bp higher with EFPs little changed.
  • The bills strip bear steepens with pricing -4 to -13.
  • The local calendar sees Judo Bank PMI data (Jun F), MI Inflation Gauge (Jun), Home Loans (May), ANZ-Indeed Job Ads (Jun) and Building Approvals (May) on Monday ahead of the RBA policy decision on Tuesday. BBG consensus is currently expecting a no-change outcome although it is far from unanimous.
  • RBA-dated OIS pricing is 3-8bp firmer across meetings today. The market attaches a 53% chance of a 25bp hike next week versus 31% pre-retail sales data.
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