Looking To Offshore Matters On Wednesday

Aussie bond futures mimicked the moves in U.S. Tsys during the overnight session, fading from best levels after recession-induced worry provided a bid. Note that YM failed to break above 97.00 once again i.e. couldn’t break below 3.00% in implied yield terms, after a similar test earlier this month also failed. The major futures contracts sit marginally above late overnight levels, with YM +1.0 & XM +1.5.

• Bills run +2 to -3 through the reds, with the strip twist steepening.
• A$800mn of ACGB Nov-32 supply headlines domestic matters today, with the monthly trade balance print out of China and the latest RBNZ monetary policy decision set to provide points of interest from further afield.
• Re: the RBNZ, data surrounding inflation expectations and pricing intentions, as well as evidence that the labour market remains extremely tight, suggest that the RBNZ still has much work to do before fulfilling its mandate. There is broad consensus that the Reserve Bank will hike the OCR by another 50bp today, continuing its fight against runaway inflation despite worrying ramifications for growth. There will be no updated economic forecasts, nor post-meeting press conference, which gives the Committee space to stick to its "stitch in time" strategy for now, before revisiting/refreshing its fundamental assumptions in August.