Richer But Narrow Ranges Ahead Of Q1 CPI Tomorrow

ACGBs (YM +2.0 & XM +3.0) are slightly richer after dealing in narrow ranges so far in the Sydney session. With Q1 CPI data due for release tomorrow, local participants appear inclined to stay on the sidelines in today’s session unless encouraged by US tsy movements to do otherwise.

• Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after a relatively subdued start to the weak.
• Q1 CPI will be watched closely as it feeds into the RBA’s updated outlook published on May 7 and thus also its decision-making.
• Bloomberg consensus expects it to ease to 3.5% y/y from 4.1% but for the quarterly rise to pick up. Trimmed mean is forecast to drop to 3.8% from 4.2%, helped by favourable base effects.
• (MNI) Given the upward surprise to NZ’s domestic inflation in Q1, there is a risk the services component remains “sticky”, which the RBA is monitoring closely (See link).
• Cash ACGBs are 2-3bps richer, with the AU-US 10-year yield differential at -32bps, its cycle low.
• Swap rates are 2-3bps lower.
• The bills strip is slightly mixed, with pricing -2 to +2.
• RBA-dated OIS pricing is little changed across meetings. A cumulative 17bps of easing is priced by year-end.