Cheaper, US Ratings Warning Pressures US Tsys

ACGBs are weaker (YM -6.0 & XM -4.5) after cash US tsys finished 1-16bps cheaper across benchmarks with the curve flatter. The 2-year rate was up for the tenth consecutive trading session, adding 13bps to 4.50%.

• US tsys reacted to negative ratings watch news from agencies Fitch and DBRS Morningstar. House speaker McCarthy was quick to respond with optimism that a deal can be struck. Separately, a Moody’s Investors Service spokesman said that a 15-June coupon payment for Treasuries will be critical – if it was missed, that’s a default and Moody’s would downgrade the rating one notch from AAA to AA1.
• US GDP was revised up slightly in Q1 to an annualised 1.3%. The core PCE deflator was revised higher by 0.1% to a 5.0% annual rate in Q1.
• Cash ACGBs opened 4-5bp cheaper with the AU-US 10-year yield differential -2bp at -7bp.
• Swap rates opened 4-5bp higher.
• The bill strip bear steepens with pricing -1 to -8.
• RBA dated OIS opened 2-5bp firmer for meetings beyond July.
• The local calendar today sees the release of April Sales. The variable timing of the Easter holiday and its proximity to other holidays can disrupt the accuracy of seasonal adjustments.