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Closes At Cheaps Ahead of FOMC

AUSSIE BONDS

ACGBs closed at session cheaps (YM -18.0 & XM -17.5) as U.S. Tsys give back early Asia-Pac strength ahead of the FOMC decision tonight. ACGBs however underperformed U.S. Tsys highlighting a continuation of yesterday’s post-RBA Minutes selling. While the RBA Minutes for March confirmed that the Board was set to evaluate the case for a pause at the April meeting it failed to provide a fresh local impetus for ACGBs.

  • Cash benchmark yields closed at their highs +17-18bp with the AU-US 10-year yield differential +6bp at -22bp.
  • Swaps shunt 15-16bp cheaper with EFPs 2-3bp tighter.
  • Bills strip closed 12-18bp cheaper with back-end whites leading.
  • RBA dated OIS closed 16-24bp firmer for meetings beyond May. April meeting pricing remained at flat.
  • On the local data front, Westpac's leading Index signalled below-trend growth with a -0.06% M/M print in February after -0.12% M/M in January.
  • The local calendar is light until next week when February retail sales (Tue) and monthly CPI (Wed) are scheduled for release. These two releases were highlighted in the RBA Minutes as important inputs to the April policy decision.
  • Attention now turns to tonight’s FOMC policy decision. BBG consensus expects a 25bp hike. The market is pricing an 82% chance of a 25bp hike.
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