Cheaper, RBA Policy Decision Tomorrow, Uncertain Outcome

ACGBs are weaker (YM -12.0 & XM -12.0), sitting at Sydney session cheaps as US tsys extend Friday’s post-Payroll sell-off in Asia-Pac trading.

• The RBA Policy Decision is scheduled for tomorrow. While the BBG consensus anticipates no change, it is important to note that this view is not unanimous. The meeting holds significance as the case for a further rate increase is likely to be seriously discussed, following the upside surprise in the April Monthly CPI Indicator.
• RBA dated OIS pricing is 2-10bp firmer for meetings beyond August with Apr’24 leading. The market currently is currently attaching a 52% chance of a 25bp hike at tomorrow’s meeting. The expected terminal rate sits at 4.17%, just shy of today’s intraday high of 4.20%. Nonetheless, the current level is the highest level since March 3. Year-end easing expectations continue to be unwound with only 4bp priced.
• Cash ACGBs are 11-12bp cheaper with the AU-US 10-year yield differential at +4bp.
• Swap rates are 11bp higher with EFPs 1bp tighter.
• The bills strip twist steepens with pricing +3 to -13.
• Ahead of the RBA decision tomorrow, the local calendar is scheduled to release Q1 Current Account and Net Exports data.