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Holding Cheaper, Watching US Tsys, Focus On RBA Decision Next Tuesday

AUSSIE BONDS

ACGBs remain sharply lower (YM -8.0 & XM -9.0) after private sector credit rises in line with expectations, printing +0.4% m/m (6.2% y/y) in May versus +0.6% (+6.6% y/y) in April.

  • In the Sydney session, ACGBs have traded within a relatively narrow range as market participants absorb the impact of the surge in US tsy yields following stronger-than-expected economic data from the US.
  • Furthermore, market sentiment is likely influenced by yesterday's stronger-than-expected retail sales data, with market participants assessing its potential implications for the upcoming RBA policy decision scheduled for next Tuesday.
  • US tsys are little changed in Asia-Pac trade despite marginally weaker Chinese non-Mfg PMI. Mfg PMI printed in line with expectations.
  • Cash ACGBs are 8bp cheaper with the AU-US 10-year yield differential -2bp at +14bp.
  • Swap rates are 7-8bp higher with EFPs little changed.
  • The bills strip bear steepens with pricing -4 to -12.
  • RBA-dated OIS pricing is 4-7bp firmer for meetings beyond September. The market attaches a 57% chance of a 25bp hike next week versus 31% pre-retail sales data.
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