Stronger As Fed Chair Softens Hawkish Tone

ACGBs are stronger (YM +5.6 & XM +6.9) with U.S Tsys weaker on the day but off session cheaps set in Asia-Pac trade yesterday (generally a little richer vs. levels seen at the Sydney close). Fed Chair Powell's second testimony had a slightly less hawkish tone, citing data dependency, noting that policy was “not on a preset path”. Cash ACGBs open 5bp to 7bp lower with the 3/10 curve 2bp flatter and the AU/US 10-year yield differential moving 6bp lower to -32bp, a cycle low.

• With the RBA having now openly canvassed the policy pause option, the BOC’s choice to follow through with its widely-signalled no-change decision, despite the Fed's hawkish tilt, is noteworthy given it highlights the possibility of divergent policy paths as the tightening cycle matures.
• Swaps open stronger with rates 2-8bp lower, the 3s10s curve 3bp flatter and EFP slightly wider.
• Bill are flat to 3bp richer, led by the reds.
• RBA dated OIS was -1bp to -3bp softer across meetings beyond June. April meeting pricing remains around a 55% chance of a 25bp hike with terminal rate pricing around ~4.05%.
• No local data is slated for today with the next releases of significance being NAB Business Confidence on (Tue)