Cheaper, Narrow Range, Awaits US PCE Deflator

ACGBs are weaker (YM -5.0 & XM -4.0) although holding above session lows. ACGBs traded within a relatively narrow range in the Sydney session with no significant domestic catalysts.

• Local market participants seemed content to adopt a wait-and-see approach in anticipation of the release of April US PCE deflator data later in the day. According to BBG consensus, the core PCE deflator is expected to show a monthly increase of 0.3% and a year-on-year figure of 4.6%, remaining unchanged from March.
• US tsys were 1-2bp richer in Asia-Pac trade.
• Cash ACGBs are 4bp cheaper with the AU-US 10-year yield differential -1bp at -6bp.
• Swap rates are 3-4bp higher with EFPs slightly tighter.
• The bills strip is steeper with pricing flat to -7.
• RBA dated OIS is little changed across meetings.
• The RBA has reiterated that it will consider later this year whether there is a case for selling Commonwealth government bonds off its balance sheet once banks have repaid the first tranche of the circa A$190bn they borrowed from RBA during the pandemic (AFR).
• The local calendar next week sees Building Approvals (Apr) on Tuesday, Construction Work Done (Q1), Private Sector Credit (Apr) and CPI Monthly (Apr) on Wednesday, Capex (Q1) on Thursday and Home Loan data (Apr) on Friday.