Richer After US Tsy Lead

ACGBs are richer (YM +3.0 & XM +4.5) with US Tsys firmer after downside surprises from ADP Employment and ISM Services give the markets a mild risk-off tone. After the bell, US Tsy 2-year and 10-year were respectively 5bp and 3bp richer. The 2-year yield closed at 3.78% after making a low of 3.64% earlier in the session. US 10-year yield closed at 3.31%. US STIR softened with an implied 10bp hike at the May FOMC, before 78bp of cuts by year-end.

• Cash ACGBs open 4bp richer with the AU-US 10-year yield differential at -8bp.
• Swap rates are 4bp lower with the 3s10s curve flatter with EFPs little changed.
• Bills are +1 to +4 with the strip flatter.
• Yesterday RBA Governor Lowe emphasised that the decision to hold rates steady this month did not imply rate increases are over. He also stated that it was premature to discuss rate cuts.
• RBA dated OIS opens with pricing 1-6bp softer for meetings beyond May. May meeting has a 20% chance of a 25bp hike priced.
• The Trade Balance for February is the key local economic release today. The RBA Financial Stability Review is also due to be published today with a likely focus on mortgage risks.