Drifting Weaker With US Tsys, IMF Suggests RBA Should Hike Rates

ACGBs (YM -6.0 & XM -6.5) are dealing cheaper and at Sydney session lows. Without domestic data drivers, the local market had drifted weaker through the session so far in line with the cheapening in US tsys in today’s Asia-Pac session. Cash US tsys are 1-2bps cheaper.

• However, Bloomberg has just reported that the IMF has advised the RBA should lift interest rates further and the Albanese government must deliver federal and state spending cuts to reduce inflation to target before 2026. In a major review of the economy, the IMF ramped up calls for “comprehensive tax reform” to fix weak labour productivity growth. (See Bloomberg link)
• Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential 1bp tighter at +17bps.
• Swap rates are 4-6bps higher, with the 3s10s curve steeper.
• The bills strip is little changed, with pricing -1 to -6.
• RBA-dated OIS pricing is little changed across meetings out to August and 2bps firmer beyond. A cumulative 35bps of easing is priced by year-end.
• Later today will see U. of Mich. Sentiment, US Existing Home Sales and Total Net TIC Flows. Also, Fed's Daly Speaks on Fox Business and in Fireside Chat.