Sharply Cheaper After An Abrupt Reversal In US Tsys, RBA Policy Decision Due

ACGBs (YM -15.0 & XM -8.0) are sharply cheaper after US tsys finished mixed, well off the session’s best levels after mildly higher-than-expected ISM Services.

• In July, the Services Index showed 51.4 (cons 51.0), confirming a return above 50 after the lowest since early in the pandemic. Coupled with firmer underlying details, imminent recession concerns that appeared to have been priced in cooled.
• Global investor risk aversion saw the US 2-year yield reach a low of 3.65%, before finishing at 3.92%, 4bps higher. There were large falls across global equity markets.
• Locally, the focus is on today’s RBA Policy Decision. The decision is announced at 1430 AEST with Governor Bullock holding a press conference at 1530 AEST. The RBA is widely expected to hold rates steady. The focus will be on the statement and accompanying forecasts (see MNI RBA Preview here).
• Cash ACGBs are 11-19bps cheaper, with the AU-US 10-year yield differential at +15bps.
• Swap rates are 7-16bps higher, with the 3s10s curve flatter.
• The bills strip has bear-steepened, with pricing -8 to -17.
• RBA-dated OIS pricing is slightly firmer across meetings. A cumulative 37bps of easing is priced by year-end.
• Today, the local calendar will also see ANZ-Indeed Job Advertisements.