Slightly Cheaper Ahead Of CPI Monthly Data

ACGBs (YM -1.0 & XM -0.5) are slightly cheaper after US tsys continued to trade in tight ranges. The 10-year yield met resistance again near the 4.2% mark before finishing at 4.25%.

• Two Fed Governors offered opposing views on the policy outlook. Bowman said she wasn’t in favour of rate cuts this year, saying “Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases”. On the other hand, Cook said it will be appropriate to reduce rates “at some point”, with the timing determined by how economic data evolve.
• Cash ACGBs are flat to 1bp cheaper, with the AU-US 10-year yield differential at -4bps.
• Swap rates are flat to 1bp higher, with the 3s10s curve flatter.
• The bills strip is little changed, with pricing flat to -1.
• RBA-dated OIS pricing is slightly firmer across meetings. A cumulative 12bps of easing is priced by year-end from an expected terminal rate of 4.37%.
• Today, the local calendar will see May’s CPI Monthly, with consensus expecting 3.8% y/y up from 3.6% the previous month. Forecasts range from 3.5% to 4.0% with most around 3.7-3.8%.
• RBA Assistant Governor Kent will speak today at 0935 AEST.
• Today, the AOFM plans to sell A$600mn of the 3.50% 21 December 2034 bond.