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Richer With US Tsys, US Tsys Bull-Flatten On Friday, CPI Data On Wed

AUSSIE BONDS

ACGBs (YM +4.0 & XM +6.5) are richer after US tsys ended last week with a bull-flattening. The 2-year yield finished 2bps lower at 4.69%, while the 10-year yield ended 7bps lower at 4.25%. The front end underperformed ahead of 2- and 5-year auctions later today. Without an obvious driver, US tsys appeared supported by short covering, bargain hunting, and technical buying.

  • Fed Williams said the economy is headed in the right direction, and it will likely be appropriate to ‘pull back on restrictive policy’ later in the year.
  • Elsewhere, ECB Lagarde said the latest euro-area wage data is encouraging but added that ‘the Governing Council needs to be more confident that the disinflation process that we are observing is sustainable and will take us to the 2% medium-term target’. The market is pricing the first 25bp rate cut at the June meeting.
  • Cash ACGBs are 4-6bps richer, with the AU-US 10-year yield differential at -11bps.
  • Swap rates are 3-5bps lower, with the 3s10s curve flatter.
  • The bills strip has bull-flattened, with pricing flat to +3.
  • RBA-dated OIS pricing is flat to 4bps softer across meetings. A cumulative 36bps of easing is priced by year-end.
  • The local calendar is empty today, with January CPI (Wed) and Retail Sales (Thu) as the week's highlights.
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