Holding Weaker, Awaits US CPI

ACGBs are holding weaker (YM -3.0 & XM -1.0), but off session lows after trading in a relatively tight range in the Sydney session. There have been few local headlines outside those related to the Federal Budget.

• The Australian Budget presented improved fiscal metrics than in October, thanks to favourable developments in commodity prices, inflation, and the labour market. A small surplus for FY23 is expected with smaller projected deficits in the out years.
• Treasurer Chalmers claimed on Budget night that the government’s policies would reduce inflation by 0.75% for 2023-24. Economist Richardson estimates that each A$6bn the government puts into the economy equates to another 25bp rate hike. The budget has added a net A$12bn over the coming year (The Australian).
• Cash ACGBs are flat to 1bp cheaper with the 3/10 curve 1bp flatter and the AU-US 10-year yield differential -2bp at -6bp.
• Swap rates are flat to 1bp higher with EFPs 1bp tighter.
• Bills pricing is flat to -1.
• RBA dated OIS pricing is 1bp softer to 2bp firmer across meetings.
• The local calendar is light tomorrow with May MI Inflation Expectations as the highlight.
• Until then, all eyes will be on the US CPI for April later today.