Little Changed Ahead Of RBA Policy Decision Tomorrow

ACGBs (YM -0.4 & XM +1.0) sit little changed and near Sydney session highs. With the domestic calendar light today, local participants have been content to sit on the sidelines ahead of the RBA Policy Decision tomorrow.

• The RBA is unanimously expected to leave rates at 4.35%. We expect some form of tightening bias to be retained as the data since the last meeting has been broadly in line with the RBA’s projections, while the significant uncertainties discussed last month have not dissipated and the risks are still “broadly balanced”. Thus, the meeting statement will probably be little changed compared with February.
• Cash ACGBs are flat to 1bp richer with the AU-US 10-year yield differential 3bps lower at -18bps.
• The swaps curve has twist-flattened, with rates 1bp higher to 1bp lower.
• The bills strip has slightly bear-steepened, with pricing flat to -2.
• RBA-dated OIS pricing is little changed across meetings. Despite this stability, the market still reflects expectations of a total easing of 35bps by year-end. This projection has, however, been reduced from nearly 50bps of anticipated easing recorded just a week ago.
• The shift follows a notable recalibration of easing expectations for the FOMC during the same period following unexpectedly high February US CPI and PPI data.