Cheaper But Off Worst Levels, Jun-54 Supply Tomorrow

ACGBs (YM -2.0 & XM -2.0) sit cheaper but off session cheaps.

• The minutes from the May 7 RBA meeting noted that the data had come in “stronger than expected” but it decided to look through short-term developments to “avoid excessive fine-tuning”.
• As a result, the Board decided to leave rates unchanged but as Governor Bullock said in the press conference a hike was discussed. While the “risks around inflation had risen somewhat”, the general tone of the minutes was neutral demonstrating a strong desire to hold rates thus the bar remains high for a move in either direction.
• (MNI) The RBA will need to alter its forecasts for inflation and employment should its key assumptions on consumption growth, labour market capacity or price rise prove overly optimistic, according to the recently published minutes from the May meeting. (See here)
• Cash ACGBs are 2bps cheaper, with the AU-US 10-year yield differential at -19bps.
• Swap rates are 1-2bps higher.
• The bills strip is cheaper, with pricing -2.
• RBA-dated OIS pricing is 3-4bps firmer for meetings beyond August. A cumulative 10bps of easing is priced by year-end off an expected terminal rate of 4.34%.
• Tomorrow, the local calendar is empty apart from the AOFM's planned sale of A$300mn of 4.75% Jun-54 bond.