Cheaper & Near Session Lows After Today’s Mixed Domestic Data Drop

ACGBs (YM -5.0 & XM -7.0) are cheaper and at Sydney session lows after today’s mixed data domestic drop. Private Capital Expenditure (1Q) comes in stronger than expected at +1.0% q/q (+0.7% est) but Building Approvals (Apr) come in much weaker than expected at -0.3% m/m (+1.8% est and +1.9% prior).

• Cash ACGBs are 4-7bps with the AU-US 10-year yield differential at -14bps.
• Swap rates are 4-7bps higher, with the curve 3s10s steeper.
• The bills strip has bear-steepened, with pricing -1 to -6.
• RBA-dated OIS pricing is flat to 4bps firmer across meetings. 1bp of easing is priced by year-end from an expected terminal rate of 4.41%.
• (AFR) While economists and investors will be cautious about reading too much into Wednesday’s monthly inflation data – Barrenjoey interest rate strategist Andrew Lilley rightly points out this remains a noisy set of numbers that, so far, has limited predictive power – it did provide more evidence that the disinflationary process in Australia has stalled. (See link)