Slightly Richer After June RBA Minutes, Apr-37 Supply Tomorrow

ACGBs (YM -2.0 & XM -4.5) are holding cheaper, but slightly richer after the release of the June policy meeting minutes from the RBA.

• The minutes suggest that the Board will hike rates if it determines that policy is “not sufficiently restrictive to return inflation to target within a reasonable timeframe” because disinflation and closure of the output gap are slower than expected.
• At the August 6 meeting that assessment will depend on Q2 CPI on July 31 and the updated staff forecasts which will include not just the new CPI but also fiscal stimulus information. It will also “carefully review the extent of spare capacity” in this exercise.
• Cash ACGBs are 2-4bps cheaper, with the AU-US 10-year yield differential -2bps.
• Swap rates are higher, with the 3s10s curve steeper.
• Bills pricing is -1 to -2.
• RBA Dated OIS is slightly softer after the release of the RBA Minutes. Pricing is currently 6-26bps firmer across meetings than pre-CPI levels. The market gives a 25bp hike in August a 44% chance. Terminal rate expectations are also dramatically firmer at 4.49% versus 4.37% before the CPI data.
• Tomorrow, the local calendar will see Judo Bank Composite & Services PMIs, Building Approvals and Retail Sales data alongside the AOFM’s sale of A$600mn of 3.75% Apr-37 bond.