Cheaper As Post-RBA Rally Pared, US Tsy Yields Higher

ACGBs (YM -2.0 & XM -4.0) are weaker as US Tsys looked through weaker-than-expected data, including ISM Mfg and JOLTS job openings, finishing the NY session 3-8bp cheaper. There were no substantive headline drivers for the post-data reversal in rates, however. It appeared algos reacted too strongly to the data with prop and fast money selling into the move. Focus turns to ADP private employment data today (+188k est vs. 497k prior), and Non-Farm Payrolls on Friday (+200k job gains vs. +209k prior).

• Cash ACGBs opened 2-3bp cheaper with the AU-US 10-year yield differential -3bp at -1bp.
• Swap rates are 1-4bp higher with the 3s10s curve steeper.
• The bills strip twist steepens with pricing +1 to -2.
• (AFR) This is the RBA’s Goldilocks scenario: inflation easing while jobs stay strong. By taking out this insurance policy of two rapid-fire rate hikes (May and June), the RBA gave itself the luxury of time. The central bank can now afford to see how economic activity, and inflation, evolve, rather than being forced into urgent measures to tame rapid price rises. (See link)
• RBA-dated OIS pricing is marginally softer across meetings.
• Today the local calendar sees no data with the AOFM’s sale of A$700mn of 3.75% 21 May 2034 bond as the highlight.