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Early Gains Relinquished, May’s Employment Report Tomorrow

AUSSIE BONDS
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In roll-impacted trading, ACGBs (YM +0.4 & XM +1.6) are largely unchanged after relinquishing the early gains driven by yesterday’s rally in US tsys. With US tsy yields steady during today’s Asia-Pac session and no significant domestic events on the calendar, the retreat from the session's peak levels likely reflects position squaring ahead of US CPI data and the FOMC policy decision.

  • Cash ACGBs are 1-2bps richer, with the AU-US 10-year yield differential at -10bps.
  • Swap rates are flat to 1bp lower.
  • The bills strip is little changed, with pricing flat to +1.
  • RBA-dated OIS pricing is unchanged across meetings. 5bps of easing is priced by year-end.
  • Tomorrow, the local calendar will see the Employment Report and CBA Household Spending data.
  • May jobs data will be watched closely given the RBA’s dual mandate. While the labour market remains tight, there are signs it is gradually easing. The data has been volatile lately so it will continue to be important to look through that volatility to the underlying trends. Bloomberg consensus expects 30k new jobs with the unemployment rate easing by 0.1pp to 4.0%.
  • If employment comes in close to consensus at 30k, it will be slightly higher than the 6-month average to April but a lot lower than the 3-month average of around 50k.
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In roll-impacted trading, ACGBs (YM +0.4 & XM +1.6) are largely unchanged after relinquishing the early gains driven by yesterday’s rally in US tsys. With US tsy yields steady during today’s Asia-Pac session and no significant domestic events on the calendar, the retreat from the session's peak levels likely reflects position squaring ahead of US CPI data and the FOMC policy decision.

  • Cash ACGBs are 1-2bps richer, with the AU-US 10-year yield differential at -10bps.
  • Swap rates are flat to 1bp lower.
  • The bills strip is little changed, with pricing flat to +1.
  • RBA-dated OIS pricing is unchanged across meetings. 5bps of easing is priced by year-end.
  • Tomorrow, the local calendar will see the Employment Report and CBA Household Spending data.
  • May jobs data will be watched closely given the RBA’s dual mandate. While the labour market remains tight, there are signs it is gradually easing. The data has been volatile lately so it will continue to be important to look through that volatility to the underlying trends. Bloomberg consensus expects 30k new jobs with the unemployment rate easing by 0.1pp to 4.0%.
  • If employment comes in close to consensus at 30k, it will be slightly higher than the 6-month average to April but a lot lower than the 3-month average of around 50k.