Stronger, At Bests, Narrow Range

ACGBs sit at or near session highs (YM +7.0 & XM +9.0) after a relatively narrow range. Trade Balance data and the RBA Financial Stability Review (FSR) failed to spark a market reaction with later session strength seemingly tied more to the richening in US Tsys (yields 2-3bp lower) in Asia-Pac trade.

• Cash ACGBs are 7-9bp stronger on the day with the 3/10 curve 2bp flatter and the AU-US 10-year yield differential -2bp at -10bp.
• Swap rates are 6-8bp lower with EFPs 1bp wider.
• Bills pricing is +1 to +7 with reds leading.
• RBA dated OIS pricing is 1-5bp softer across meetings beyond May with a 22% chance of 25bp tightening priced for May. 27bp of easing is priced by year-end.
• On the local data front, February’s trade balance printed a much larger-than-expected surplus of A$13.87bn (versus A$11.22bn expected) as imports dropped 9.1% M/M.
• The FSR stated that households and firms were well-placed to cope with higher interest rates. RBA also noted that about 40% of home loans have less than 3-months buffer.
• With the global calendar light ahead of US Non-Farm Payrolls on Friday, the direction in the local market will likely be guided by risk appetite and US Tsys.