Slightly Weaker, US Tsys Bull Steepen, May-28 Supply Due

ACGBs (YM -2.0 & XM -4.5) are slightly weaker, despite US tsys finishing 2-8bps richer. The yield on the US 10-year note finished the NY session 3bps lower to 4.58%, after touching a fresh 16-year high of 4.6861% in a volatile, heavy volume data-impacted morning session.

• Bund yields rose to a fresh 12-year high of 2.98%, and the risk premium over Italian debt hit a six-month-high after the government cut its growth forecasts for this year and next and increased its budget deficit targets.
• (AFR) Goldman said, “The longer the [US] economy remains resilient to higher rates, the more that the risks to forward rates are likely modestly to the upside as neutral rate views remain under pressure. If the economy enters recession, the market will likely take that as confirmation of the belief that policy rates at these levels are highly restrictive. This scenario would likely lead to a fall in long-term rates.”
• Cash ACGBs have opened 1-4bps cheaper, with the AU-US 10-year yield differential 6bps higher at -8bps.
• The swaps curve has bear-steepened, with rates flat to 4bps higher.
• The bills strip is little changed.
• RBA-dated OIS pricing is slightly mixed across meetings.
• Today the local calendar sees Private Sector Credit data for August.
• Today the AOFM plans to sell A$800mn of the 2.25% 21 May 2028 bond.