Cheaper, Narrow Ranges Ahead Of FOMC Decision

ACGBs (YM -7.0 & XM -6.0) are weaker after dealing in a relatively narrow range in the Sydney session. The local calendar has been light today, with Westpac leading index (-0.4% m/m) as the only release. Accordingly, local participants have likely been on headlines and US tsys watch ahead of the FOMC decision later today.

• Traders expect the Fed to keep rates on hold with a tightening bias. The median of analysts’ expectations for the Fed’s September Dot Plot rates suggests that the central expectation is for no changes from June’s projections: 5.6% for 2023, 4.6% for 2024, 3.4% for 2025, with the new entry for 2026 at 2.6%, and the Longer-Run rate at 2.5%.
• Narrow ranges have persisted in US tsy dealing in the Asia-Pac session, with no meaningful macro newsflow crossing. Cash US tsys sit little changed across the major benchmarks.
• Cash ACGBs are 5-6bps cheaper, with the AU-US 10-year yield differential at -14bps.
• Swap rates are 5bps higher, with EFPs little changed.
• Bills strip pricing is -6 to -7 for contracts beyond Dec-23.
• RBA-dated OIS pricing is 3-7bps firmer across meetings beyond Dec’23.
• Tomorrow the local calendar is empty, ahead of Judo Bank PMIs on Friday.