Slightly Weaker, US Tsy Curve Bear Flattens, Q2 CPI Tomorrow

ACGBs (YM -2.0 & XM -1.0) are slightly cheaper as US tsys finished 2-8bp cheaper across the major benchmarks with the curve flatter. US tsys strengthened in tandem with EGBs after weaker-than-expected European PMI data. US tsys then seesawed as the latest US PMIs showed continued services price pressure along with softer expected business activity. Sizeable flows weighed on tsys in the NY session, a block seller of 43k in TU was the highlight.

• FOMC dated OIS price a 25bp hike into Wednesday's meeting, with a terminal rate of ~5.40% in November. There are ~55bps of cuts priced to March 2024.
• Cash ACGBs opened 1bp cheaper with the AU-US 10-year yield differential -4bp at +13bp.
• Swap rates are 1bp higher.
• The bills strip bear steepens with pricing flat to -5.
• RBA-dated OIS pricing opens slightly softer.
• (AFR) Rising vacancies at big office towers such as Grosvenor Place in Sydney have led to office market sentiment declining sharply, with property professionals expecting lower capital and rental growth in the sector. (See link)
• Today the local calendar sees no data releases ahead of Q2 CPI on Wednesday. RBA’s Connolly and Thompson, Head and Deputy Head of Payments Policy, appear before the Senate Committee on Digital Assets today.