Cheaper, US Tsys Slightly Weaker In Friday Trade

ACGBs are cheaper (YM -3.0 & XM -2.0) after US Tsys reversed early session strength to close moderately weaker in NY trade ahead of the weekend. The move from session highs was assisted by S&P US Manufacturing and Services PMIs for April beating expectations.

• Cash ACGBs are 2-3bp cheaper with AU-US 10-year yield differential -3bp at -9bp.
• Swap rates opened 2-3bp higher with the 3s10s curve 1bp flatter.
• Bills strip is steeper with pricing -3 to -6.
• It is a quiet start to the week with no data scheduled ahead of the ANZAC Day holiday tomorrow.
• The focus for the market this week will be the release of Q1 CPI data on Wednesday. According to BBG consensus, annual headline inflation is expected to slow to +7.0% from 7.8% in Q4. Trimmed Mean CPI is expected to print +1.4% Q/Q and 6.7% Y/Y versus +1.7% and +6.9%. The RBA forecasted 6.25% trimmed mean inflation by Q2’23. A material upside surprise in Q1 would therefore likely make the market even more uncomfortable regarding the RBA’s forecasted slow return to target for underlying inflation (currently forecasted by mid-2025).
• RBA dated OIS opened flat to 3bp firmer across meetings with a cumulative 25bp of tightening priced by August.