Firmer, US Tsys Richer As The Labour Market Cools

ACGBs are firmer (YM +4.0 & XM +5.0) after US tsys firmed following another lift in initial jobless claims, confirming the labour market is finally starting to cool. Last week, the number of initial jobless claims rose by 22,000 to 264,000, marking the highest level since October 2021. US PPI data was largely consistent with expectations, supporting yesterday's CPI data and indicating that inflationary pressures are subsiding. The market's risk-off tone was further exacerbated by the news that PacWest Bancorp's total deposits fell by 9.5% last week, causing the share to drop by around 20%. After the NY bell US tsy yields out to the 10-year were 1-6bp lower with the curve flatter after a volatile session.

• Cash ACGBs opened 3-5bp richer with the AU-US 10-year yield differential 2bp at -5bp.
• Swap rates opened 3-4bp lower.
• The bills strip twist flattens with pricing -2 to +2.
• RBA dated OIS opened little changed across meetings.
• Previously unpublished internal RBA research, released as a result of a freedom of information request, estimates that Australia's risk of recession over this year and next could be as high as 80 per cent - ABC. link
• The local calendar is light until the RBA Minutes for May are released early next week.