Slightly Richer, US Tsys Richer After FOMC But Gains Pared

ACGBs (YM +1.0 & XM +1.0) are slightly richer after US tsys finished stronger, albeit off session highs, following a less hawkish than feared FOMC statement. A “Higher for Longer” message was delivered but the market focused on Powell’s comment in the press conference that the next policy rate move is unlikely to be an increase.

• Fed Funds implied rates softened after the FOMC: 16bps Sep (from 13bps), 23bps Nov (from 19bps) and 35bps Dec (from 29bps).
• Ahead, of the FOMC meeting, the ISM manufacturing index (49.2 in April) moved back into contractionary territory after the previous month’s upside surprise. Also, JOLTs data showed further signs of easing labour market pressures. The number of job openings dropped to a three-year low and the quits rate fell to 2.1%, the lowest since August 2020. However, US private payrolls increased more than expected in April while data for the prior month was revised higher.
• Cash ACGBs are 2bps richer, with the AU-US 10-year yield differential 3bps higher at -14bps.
• Swap rates are 2bps lower.
• The bills strip has bull-flattened, with pricing flat to +3.
• RBA-dated OIS pricing is 2-4bps softer for meetings beyond September. The expected terminal rate sits at 4.44%.
• Today, the local calendar will see Building Approvals and Trade Balance data.