Cheaper, Near Session Lows, Rate Cut Expectations Pared

ACGBs (YM -5.0 & XM -4.5) are cheaper and hold near Sydney session lows after dealing in relatively narrow ranges. With the domestic calendar light, the local market has eyed the 1-3bp cheapening in cash US tsys in today’s Asia-Pac session, after yesterday’s sharp sell-off.

• After yesterday’s press conference from RBA Governor Bullock, RBA Hunter, Assistant Governor (Economic), and RBA Cassidy, Deputy Head, Economic Analysis appearance before the Senate Select Committee on the Cost of Living failed to be market moving.
• (AFR) Reserve Bank governor Michele Bullock has sensibly nixed premature clamouring for an interest rate cut this year and subtly sent a message to governments that their profligate pre-election spending is prolonging the inflation problem. (See link)
• Cash ACGBs are 4bps cheaper on the day and 8-12bps cheaper than pre-RBA decision levels. The AU-US 10-year yield differential is flat at +17bps.
• Swap rates are 4-5bps higher.
• The bills strip has bear-steepened, with pricing -1 to -7.
• RBA-dated OIS pricing is 5-6bps firmer across meetings beyond September today, with early 2025 leading.
• Today’s move leaves pricing 6-20bps firmer across meetings than pre-RBA levels.
• A cumulative 20bps of easing is priced by year-end versus 30bps before the RBA decision.