Global Bond Yields Higher After Surprise BoC Hike

ACGBs are cheaper (YM -13.0 & XM -13.5) as global yields surged overnight. This cheapening was triggered by the unexpected rate hike from the BoC, which occurred just one day after a similar move by the RBA. Cash US tsys finished 8-14bp cheaper with the curve steeper.

• The US Tsy provided guidance on plans to increase the issuance of bills to continue financing the government and to rebuild the cash balance to a level in line with policy. Despite being well-flagged the announcement weighed on the short end of the curve.
• FOMC pricing suggests a strong likelihood that the Federal Reserve might initiate another rate hike in July, following a temporary pause in June. The cumulative expectation is for a total increase of 21bp over the next two meetings. The release of US CPI data next week, a day before the FOMC meeting, is anticipated to be a significant event.
• Cash ACGBs opened 13-14bp cheaper with the AU-US 10-year yield differential at +16bp. The 3-year yield reaches its highest level since 2011.
• Swap rates are 13-14bp higher.
• The bills strip bear steepens with pricing -2 to -16.
• RBA dated OIS opened 5-12bp firmer for meetings beyond September.
• Today trade data for April print and the trade surplus is expected to narrow slightly to $13.65bn. There is also March industrial disputes data.