Stronger, Global Bond Yields Lower, Dovish Fedspeak, Strong 3Y Tsy Auction

ACGBs (YM flat & XM +2.5) are stronger after global bond yields declined overnight, with falls concentrated in longer-term yields. The US tsy 10-year yield declined 7bp to around 4.02%. Nevertheless, the 10-year yield remains some 20bp higher than month-ago levels.

• Risk appetite was hit by another soft set of China trade data and rating downgrades for US banks.
• A strong 3-year auction soothed concerns over finding buyers for the mountain of supply that is ahead. 10-year supply today. There is $103bn in 3-, 10- and 30-year treasury auctions scheduled for this week (Bloomberg).
• Fed’s Harker (’23 voter) stated that the Fed doesn’t want to overdo it with Fed tightening and we’ll start cutting rates sometime probably next year. The mention of cuts comes after similar comments from Williams yesterday, even if it is still consistent with the median dot from the June SEP pencilling in 5.5-5.75% for 4Q23 going to 4.5-4.75% for 4Q24.
• Cash ACGBs opened 1-2bp richer with the AU-US 10-year yield differential at -3bp.
• Swap rates are 1-2bp lower.
• Bills strip pricing is little changed.
• RBA-dated OIS pricing is little changed.
• Today the local calendar sees no data. The AOFM does however plan to sell A$700mn of the 2.75% 21 June 2035 bond.