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Slightly Cheaper Ahead Of The RBA Policy Decision

AUSSIE BONDS

ACGBs (YM -2.0 & XM -0.5) are slightly cheaper ahead of today’s RBA Policy Decision at 1430 AEDT. Overnight, US tsys finished with yields 2-10bps higher and the curve flatter. This move pared Friday’s strong rally, which followed Fed Chair Powell’s fireside chat. Markets tempered 2024 rate cut projections ahead of Friday's Non-Farm Payrolls data. There were no real catalysts for the move, just concerns that markets were overbought and rate-cut bets were too optimistic. US factory orders receded more than expected on the US data front, with durables in line.

  • Today’s RBA Policy Decision is widely expected to deliver an unchanged cash rate of 4.35%. (see MNI RBA Preview here)
  • Cash ACGBs are flat to 1bp cheaper, with the AU-US 10-year yield differential flat at +20bps.
  • The swaps curve has bear-flattened, with rates flat to 2bps higher.
  • The bills strip is slightly cheaper, with pricing flat to -2.
  • RBA-dated OIS pricing is flat to 4bps firmer across meetings, with the market attaching an 11% probability to a 25bps rate hike today.
  • November Judo Bank composite & services PMIs fall to 26-month lows.
  • Today, the local calendar also sees Q3 current account data.
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