Little Changed, Debt Ceiling Remains The Focus

ACGBs are little changed (YM +1.0 & XM flat) as US tsys finished NY trade slightly stronger after a late session risk-off move. Ongoing concerns about the unresolved debt ceiling negotiations continued to dominate headlines. While Republicans maintained their unwavering position against any tax changes, resulting in an elusive deal as highlighted by McCarthy, Democrats continued their efforts to bolster revenues and cut spending.

• The US tsy 10-year yield declined 2bp to 3.69% after reaching a peak of 3.76% overnight, marking a new high for the past two months. The curve has flattened, with the 2-year rate 1bp higher at 4.32%.
• Cash ACGBs opened flat to 1bp richer with the AU-US 10-year yield differential +3bp at -4bp.
• Swap rates opened flat to 1bp lower with the 3s10s curve 1bp steeper.
• The bills strip is little changed with pricing flat to +1.
• RBA dated OIS opened flat to 1bp softer across meetings with a 20% chance of a 25bp rate hike in June priced.
• The local calendar is light today with the Westpac-MI Leading Index as the only release.
• The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond.