Richer, Near Session Highs, PMIs Portray A Weak Economy

ACGBs (YM +2.0 & XM +4.5) are richer, dealing at or near Sydney session highs.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Judo Bank PMIs for August, which showed that private sector output continued to contract in August, especially in the important services sector.
• A strengthening by US tsys in Asia-Pac trade assisted the local market’s move away session cheaps. Little meaningful macro news flow has crossed. US tsys sit 1-3bps richer across the major benchmarks.
• Cash ACGBs are 3-4bp richer, with the AU-US 10-year yield differential 2bp tighter at -8bp.
• ACGB Nov-33 supply sees strong demand, with average yield printing below the prevailing yield. The cover ratio showed above the 4.00x mark.
• Swap rates are 1-4bp lower, with the 3s10s curve flatter.
• The bills strip has bull flattened, with pricing flat to +3.
• RBA-dated OIS pricing is flat to 2bp softer across meetings. The market continues to attach a 5% chance of a 25bp hike at the September meeting. Terminal rate expectations sit at 4.21%.
• The local calendar is empty for the rest of the week.
• The US calendar sees new home sales and S&P Global Manufacturing PMI later today.