Stronger, US Tsy Curve Twist Steepens, Awaiting SoMP

After a night of global bond volatility, ACGBs are mildly stronger (YM +4.0 & XM +1.0) ahead of the RBA Statement on Monetary Policy (SoMP).

• The ECB raised the deposit rate by 25bps to 3.25% and announced the end of APP bond reinvestments by July. ECB President Lagarde reiterated further hikes were ahead, but the tone of the policy assessment was less hawkish than expected.
• In the NY session, US regional banking concerns centred on PacWest Bank. US tsys initially fell after higher-than-expected unit labour costs but recovered on strong risk-off buying. After the bell, 2- and 10-year benchmark yields respectively 1bp lower and 4bp higher.
• Cash ACGBs opened 1-4bp richer with the AU-US 10-year yield differential at -8bp.
• Swap rates opened 1-5bp lower with the 3s10s curve 4bp steeper.
• Bills pricing is -1 to +4 with late whites/early reds leading.
• RBA dated OIS opened 3-6bp softer for meetings beyond August with a 5% chance of a 25bp rate hike at the June meeting priced.
• The SoMP will be the local highlight today. The market will pour over the forecast update for clues about the policy outlook. RBA Kohler revealed on Wednesday a downward revision to growth but with a basically unchanged inflation outlook.