Cheaper With US Tsys & EGBs, Capex & Bldg Apps Data Due

ACGBs (YM -4.0 & XM -5.5) are cheaper global bond yields moved steadily higher. German 10-year bund yields closed 10bps higher at 2.69% after stronger-than-expected May inflation.

• Annual CPI increased to 2.8% from 2.4% in April primarily due to base effects for transport prices. This was above median forecasts for a 2.7% increase. The market now looks ahead to tomorrow’s release of preliminary CPI data for the Eurozone.
• US tsys were also pressured by a weak US$44 billion 7-year auction. The bid-to-cover of 2.43 marked the lowest outright demand in a year.
• The 10-year cheapened another 6bps to 4.61% and is 25bps+ higher since May 15.
• Fed's Beige Book detailed 'modest' price growth across the survey period, but markets proved unresponsive ahead of key PCE data due Thursday and Friday.
• RBA Hunter states at a conference in Sydney that the RBA broadly agrees with Treasury’s inflation forecasts.
• Cash ACGBs are 3-5bps with the AU-US 10-year yield differential at -16bps.
• Swap rates are 3-5bps higher, with the curve 3s10s steeper.
• The bills strip has bear-steepened, with pricing -2 to -4.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings. 1bp of easing is priced by year-end from an expected terminal rate of 4.40%.
• The local calendar today will see Private Capital Expenditure and Building Approvals.