Cheaper, US Tsys Look Through Softer ISM Data, RBA Minutes Due

ACGBs (YM -4.0 & XM -5.5) are cheaper after US tsy yields moved higher despite ISM Mfg and Prices Paid printing below expectations. A less decisive victory for the far-right in the weekend’s French election saw EGBs and US tsys pressured as the risk premium was unwound.

• Other factors at play included carry-over month-end positioning and post-debate fears of expansionary policies from the Trump administration if there is a Republican sweep in November.
• US equities finished stronger, led by NASDAQ’s 0.8% jump to a fresh all-time high, the 21st of the year. The S&P 500 was 0.3% firmer, just off its June 18 historic peak.
• The US calendar is light today ahead of ADP private employment, ISM services, and weekly claims on Wednesday, the 4th of July holiday on Thursday and June employment data on Friday.
• Cash ACGBs are 3-5bps cheaper, with the AU-US 10-year yield differential -3bps.
• Swap rates are higher, with the 3s10s curve steeper.
• Bill strip pricing is -2 to -4.
• RBA Dated OIS is firmer today ahead of the RBA Minutes of the June Policy Meeting. Pricing is currently 6-27bps firmer across meetings than pre-CPI levels. The market gives a 25bp hike in August a 44% chance. Terminal rate expectations are also dramatically firmer at 4.50% versus 4.37% before the CPI data.