Little Changed, Sitting In The Middle Of The Post-RBA Range

ACGBs sit little changed (YM +1.0 & XM +1.0) in the middle of the post-RBA decision range. Without domestic drivers, local participants have likely eyed movements in cash US tsys as they continue to digest yesterday’s decision by the RBA to leave the cash rate unchanged at 4.1%.

• The accompanying statement noted that “some further tightening” may still be needed to return inflation to target, thus keeping the Board’s options open. If services inflation due on July 26 doesn’t decline substantially, then a hike on August 1 is distinctly possible, as the labour market remains “very tight”, wages growth is picking up, house prices are rising, and households have savings buffers.
• Cash US tsys are 0.2-3.6bp richer across the major benchmarks after being closed yesterday for the Independence Day holiday.
• Cash ACGBs are 1-2bp richer after the latest round of ACGB Nov-33 supply sees firm pricing, with the weighted average yield printing 0.84bp through prevailing mids (per Yieldbroker) and the cover ratio rising above 4.70x.
• Swap rates are 1-2bp lower with EFPs slightly wider.
• The bills strip is little changed with pricing -1 to +1.
• RBA-dated OIS pricing is flat to 1bp softer across meetings with the terminal rate at 4.50% versus its pre-RBA decision level of 4.60%.