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Cheaper, US Tsys Pressured Risk-On, Hawkish Fedspeak & Bill Issuance


ACGBs are cheaper (YM -8.0 & XM -8.5) following the weaker lead from US tsys in NY trade. US tsys finished with yields 5-10bp higher across major benchmarks. This increase was driven by optimism regarding a potential resolution to the debt ceiling issue, as well as hawkish remarks from the Dallas Fed's Logan, who indicated support for another interest rate hike in June due to sustained high core inflation and wages.

  • The US Treasury's plan to increase cash buffers through approximately $1 trillion in bill issuance following the debt ceiling resolution also exerted downward pressure on US tsys.
  • Cash ACGBs opened 8-9bp cheaper with the AU-US 10-year yield differential +2bp at -7bp.
  • Swap rates are 8-9bp higher with the 3s10s curve steeper.
  • The bills strip is steeper with pricing -4 to -9.
  • RBA dated OIS opened1-8bp firmer across meetings with early '24 leading. There is an 18% chance of a 25bp hike at the June meeting priced with the expected terminal rate back at 4.0%.
  • According to a Bloomberg article, TD Securities believes the potential shift of the RBA to quantitative tightening means the bank would rely less on the cash rate. (link)
  • The local calendar is light until Retail Sales on May 26.

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