Richer, Narrow Ranges, Awaiting Q1 CPI Tomorrow

ACGBs (YM +3.0 & XM +4.0) are slightly richer after dealing in narrow ranges so far in the Sydney session. With Q1 CPI data due for release tomorrow and US tsys showing no net movement in today’s Asia-Pac session, local participants have largely sat on the sidelines.

• 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 3-4bps richer, with the AU-US 10-year yield differential at -33bps, its cycle low.
• Swap rates are 3-5bps lower, with the 3s10s curve flatter.
• The bills strip has twist-flattened, pivoting at late-whites, with pricing -2 to +3.
• RBA-dated OIS pricing is little changed across meetings. A cumulative 17bps of easing is priced by year-end.
• Later today, the US calendar will see Philadelphia Fed Non-Manufacturing Activity, S&P Global US PMIs and New Home Sales.