Off Early Cheaps

Aussie bonds have edged away from worst levels observed after RBA Governor Lowe’s speech earlier in the session, with relatively limited trade in U.S. Tsys providing little impetus for the ACGB space. Cash ACGBs have bear flattened, running 3-5bp cheaper across the curve, while Aussie bond futures are off of session extremes. YM is -4.5 while XM is -4.0. Bills run 2 to 9 ticks cheaper through the reds.

• RBA Gov Lowe emphasised the need for a continued path of steady rate hikes in the coming meetings, in order to maintain the anchoring of inflation expectations, with the Governor also reiterating that the neutral cash rate is at least 2.50% (he also acknowledged the uncertainty surrounding such calculations), offering a slightly more conservative assessment of the neutral rate than that offered by Deputy Governor Bullock on Tuesday (albeit Lowe was more caveated with the “at least” and subsequent language surrounding inflation). The Treasurer also outlined the heavily awaited wide-spanning review of the RBA, with the details available here.
• The ACGB May-32 auction went well, seeing the weighted average yield print 0.78bp through prevailing mids (per Yieldbroker), with the cover ratio printing 3.0025x, a shade above the 3.00x handle. The result builds on the recent run of strong ACGB auction results, with the easily-digestible DV01 and benchmark 10-Year status of the line facilitating smooth takedown.
• Tomorrow’s domestic data docket is thin at best.