Fed Chair Powell’s Testimony Doesn’t Sustain Move, May-34 Supply Due

ACGBs (YM flat & XM -2.5) are slightly weaker after a directionless NY session for US tsys ahead of US CPI data on Thursday.

• Fed Chair Powell’s testimony to lawmakers, where he largely repeated previous messages, didn’t sustain any move in the market. There was brief volatility in response to more dovish comments: "It doesn't seem likely that the next policy move would be a rate increase," he told the Senate Banking Committee.
• Also, “Elevated inflation is not the only risk we face. Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
• Support quickly evaporated as Powell stated the "Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%."
• Cash ACGBs are flat to 3bps cheaper, with the AU-US 10-year yield differential at +7bps.
• Swap rates are flat to 2bps higher.
• Bill strip pricing is flat to -1.
• RBA-dated OIS pricing is slightly firmer across meetings. Terminal rate expectations sit at 4.47%.
• Today, the local calendar is empty apart from the AOFM’s sales of A$700mn of the 3.75% 21 May 2034 bond.