Slightly Cheaper, Post-RBA Rally Pared

ACGBs are slightly cheaper (YM -1.0 & XM -0.5) with global markets subdued due to the 4^th of July holiday in the US. US tsy futures are little changed.

• ACGB futures sit a net 2-3bp richer from pre-RBA decision levels. Futures had richened as much as 9bp after the RBA left the cash rate unchanged at 4.1%.
• The board decided to pause in order to have time “to assess the state of the economy and the economic outlook and associated risks” given the “uncertainty surrounding the economic outlook”. The RBA observed that there has been significant tightening since May 2022.
• However, “some further tightening” may still be needed to return inflation to target. If services inflation due on July 26 doesn’t decline substantially, then a hike on August 1 is distinctly possible, as the labour market remains “very tight”, wages growth is picking up, house prices are rising and households have savings buffers.
• Cash ACGBs opened 1bp cheaper.
• Swap rates are -1bp lower to 1bp higher.
• The bills strip is steeper with pricing flat to -3.
• RBA dated OIS pricing opened little changed.
• Today the local calendar is light with the AOFM sale of A$700mn of the 3.00% 21 November 2033 bond as the highlight.