Richer, US Tsys Bull Flatten Following Weaker EU & US PMIs

ACGBs (YM +5.0 & XM +7.5) are richer after the tailwind for European rates triggered by weaker-than-expected European PMIs carried over to US tsys. Eurozone Mfg & Services PMIs remained sub-par, 43.7 and 48.3 respectively, with the German Composite PMI (44.7) down to the lowest level in 3 years.

• US tsys extended the early rally after S&P PMIs came out lower than estimated: S&P Global US Mfg PMI (47.0 vs 49.0 est), Services (51.0, 52.2 est), Composite (50.4, 51.5 est).
• Cautious short covers were reported with many market participants leaning short in anticipation of hawkish messaging from central banks at the Jackson Hole eco-summit that starts Thursday evening.
• US tsys finished 8-13bps richer across the major benchmarks, with the curve flatter.
• The move lower in yields likely contributed to softish demand at the US$16 billion 20-year tsy auction. The auction tailed by nearly 1 bp with a relatively soft bid-cover ratio.
• Cash ACGBs opened 6-7bp richer with the AU-US 10-year yield differential +3bp at -7bp.
• Swap rates are 5-7bp lower, with the 3s10s curve flatter.
• The bills strip has bull flattened, with pricing +1 to +7.
• RBA-dated OIS pricing is 2-6bp softer for meetings beyond November, with Sep'24 leading.
• Today the local calendar is empty.