Richer With Tsys, Market Looked Past US PPI Beat, Jun-51 Supply Due

ACGBs (YM +3.0 & XM +0.5) are richer after US tsys bull-steepened into the weekend, with the 2-yield down 6bps and the 10-year down 3bps. This came despite higher-than-expected PPI data on Friday.

• PPI increased 0.2% m/m, and core prices rose by 0.4%, above the 0.2% median forecast.
• The July Michigan consumer sentiment index fell to 66, below the consensus estimate of 68. 5–10-year inflation expectations dropped to 2.9% from 3.0%.
• US equities remained well supported into the weekly close. The S&P traded to another intra-day record high, but lost ground late in the session, to close 0.6% higher. Large banking stocks underperformed after reporting disappointing results.
• Cash ACGBs are 1-3bps richer, with the AU-US 10-year yield differential at +13bps.
• Swap rates are 1-2bps lower.
• The bills strip is stronger, with pricing +2 to +3.
• RBA-dated OIS pricing is 3bps softer for 2025 meetings. Terminal rate expectations drop to 4.40% versus its recent high of 4.52%.
• The local calendar is light ahead of Thursday’s release of the June Employment Report.
• However, the AOFM plans to sell A$300mn of the 1.75% 21 June 2051 bond today, ahead of A$500mn of the 3.00% 21 November 2033 bond on Wednesday and A$700mn of the 2.75% 21 November 2027 bond on Friday.