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Richer, Weaker ISM Offsets Oil Spike

AUSSIE BONDS

ACGBs are richer (YM +9.0 & XM +8.0) following the stronger lead from US Tsys with yields 6-7bp lower in NY trade. US Tsys had weakened in Asia-Pac trade after news over the weekend that OPEC+ was planning to cut production. Oil prices gained 6% on Monday. US Tsys however reversed course after weaker than expected US Manufacturing ISM (46.3 versus 47.5 expected). All the key ISM sub-indices fell deeper into contractionary territory, with new orders, prices paid and employment dropping sharply.

  • Cash ACGBs opened 8-9 stronger with the 3/10 curve 1bp steeper and the AU-US 10-year yield differential at -17bp.
  • Swaps are 8bp richer across the curve.
  • Bills strip has twist flattened with pricing -2 to +10.
  • The RBA is set to announce its policy decision today (0530 BST) with BBG consensus expecting a no-change outcome for the first time since April 2022.
  • RBA dated OIS is currently attaching an 82% chance of such an outcome. While an April hike is priced as an outside chance, the cumulative tightening over April and May meetings is at 10bp, the highest level since 20 March.
  • RBA Governor Lowe is scheduled to give an address to The National Press Club (Sydney) tomorrow.
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