Richer, At Best Levels, RBA’s FSR Signals Financial Pressures

ACGBs (YM +2.0 & XM +0.5) are slightly richer and sit at or near Sydney session highs. It has been a light day of newsflow, with the RBA’s Financial Stability Report as the highlight.

• The RBA reported that “Early indicators show that financial pressures have increased. Many households are facing a squeeze on their budgets and have had to make (in some cases, substantial) adjustments to their spending or saving patterns in light of the increase in inflation and interest rates over the past 18 months. The incidence of severe financial stress has increased but remains low.” (See link)
• US tsys are slightly cheaper in the Asia-Pac session ahead of Non-Farm Payrolls later today. Bloomberg consensus expects +170k versus +187k prior. The unemployment rate is forecast to dip to 3.7% from 3.8% prior.
• The cash ACGB curve has bull-steepened, with yields 1-3bps lower. The AU-US 10-year yield differential is unchanged at -16bps.
• Swap rates are 3bps lower.
• Bills pricing is +2 to +3 across the strip.
• RBA-dated OIS pricing is 2-4bps softer across 2024 meetings.
• AFR reports that “A sharp fall in imports of goods such as industrial equipment and high-tech machinery could signal that businesses are finally scaling back investment in response to high-interest rates.” (See link)