Richer With US Tsys, Focus On Employment Report

In roll-impacted trading ACGBs (YM +5.4 & XM +6.4) are stronger after US tsys finished sharply richer. Softer than expected US CPI data contributed to large moves ahead of the FOMC.

• Core inflation increased by 0.2% m/m, below expectations for a 0.3% gain. This took the annual core rate to 3.4%, the slowest pace in more than three years. Super core services inflation ex housing declined marginally and was the first negative reading since September 2021.
• US tsys however finished off their best levels after the June FOMC meeting was hawkish versus expectations. Overall, the theme portrayed by the meeting communications is that rate cuts are being delayed, but they are still expected by year-end, and the ultimate destination hasn’t changed. (See MNI Fed Review here)
• Cash ACGBs are 5-6bps richer, with the AU-US 10-year yield differential at -10bps.
• Swap rates are 6-7bps lower.
• The bills strip bull-flattened, with pricing flat to +6.
• RBA-dated OIS pricing is flat to 5bps softer across meetings, with 2025. 9bps of easing is priced by year-end.
• Today, the local calendar will see the Employment Report and CBA Household Spending data.
• May jobs data will be watched closely given the RBA’s dual mandate. Bloomberg consensus expects 30k new jobs with the unemployment rate easing by 0.1pp to 4.0%.