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Cheaper, Narrow Range

AUSSIE BONDS

ACGBs sit cheaper (YM -7.0 & XM -5.5) in a relatively narrow range with U.S. Tsys little changed in Asia-Pac trade. Job Vacancy data for February printed -1.5% Q/Q but failed to provide a local driver for the market which has likely shifted its focus to next Tuesday’s RBA decision.

  • Based on market pricing, this week’s CPI and retail sales data should be enough to offset resilient business conditions and robust jobs data and deliver a pause from the RBA next week. RBA dated OIS pricing attaches an 18% chance of a 25bp hike in April.
  • More noteworthy, however, has been the firming in May meeting pricing, which hit its highest level since 15 March. The cumulative tightening over April and May meetings is now at 10bp versus -8bp on 20 March. With global banking concerns receding, the market appears to be starting to hedge itself against the possibility of an unfavourable Q1 CPI print on 26 April.
  • Cash ACGBs are 5-6bp weaker with the AU/US 10-year yield differential +2bp at -24bp.
  • Swaps are 4-5bp cheaper with the 3s10s curve 1bp flatter and EFPs little changed.
  • Bills pricing is -4 to -9 with whites leading.

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