Stronger Ahead Of RBA Decision

ACGBs (YM +3.0 & XM +4.0) are stronger after US tsys finished the NY session little changed across benchmarks. In a mostly data-light session, US tsys observed narrow ranges. Gains were pared as the US Tsy announced larger than expected Q3 Issuance of $1.007tn in privately held marketable debt.

• The RBA meets today and is expected to discuss leaving rates at 4.1% or increasing them by 25bp. We expect at the margin that the RBA will keep rates at 4.1% with the tightening bias retained but it is another very close call. We think that the new information in the last month is unlikely to change the central bank’s forecasts or view materially, and as such the July pause should be extended. (See MNI RBA Preview here).
• Cash ACGBs opened 4bp richer with the AU-US 10-year yield differential -1bp at +6bp.
• Swap rates are 4bp lower.
• The bills strip has bull steepened with pricing flat to +4.
• RBA-dated OIS pricing is flat to 4bp softer across meetings. The market attaches a 30% chance of a 25bp hike at today's meeting.
• Australian house prices posted a fifth consecutive rise in July as the market rides a jump in immigration at a time of surging construction costs and falling housing supply. CoreLogic's national home value index rose 0.7% in July from June. (See link)