Heavy After PCE-Induced Sell-Off In U.S. Tsys

ACGBs trade heavy (YM -8.0 & XM-7.5, a little off overnight lows) in morning trade, following the weaker lead from U.S. Tsys. A higher-than-expected PCE print sparked an 8-12bp rise in Tsy yields, flattening the curve back towards inverted extremes and providing a cycle high for the 2-year yield. Cash ACGBs post 6-8bp of cheapening as a result, with the 3/10 curve 1bp flatter and the AU/U.S. 10-year yield differential -2bp at -5bp.

• Swap rates spike higher at the open but retrace back to a subdued 1-2bp move, with the 3s10s curve 1bp steeper.
• Bills are 1-11bp softer through the reds.
• RBA dated OIS react to the U.S. lead with pricing for meetings beyond June 5-11bp firmer, led by November and December. March meeting pricing remains at a 95% chance of a 25bp hike, but terminal cash rate rate pricing firms to ~4.36%.
• The local calendar is heavy this week, with a batch of quarterly partial releases leading up to the release of Q4 GDP on Wednesday. Monthly reads on Retail Sales and Private Sector Credit are also slated.
• Near-term, today sees the release of Q4 Company Profits and Inventories, while the AOFM will auction A$300mn of ACGB Mar-47.