Stronger, US Tsys Richer, US CPI Details Encouraging

ACGBs are stronger (YM +6.0 & XM +4.5) following a bull steepening of the US cash tsy curve in NY trade. US headline and core ex-food & energy inflation rose in line with expectations, with both measures +0.4% m/m. However, rent increases were below the average of the past year, and services prices excluding housing and energy - a measure closely watched by Fed Chair Powell - showed the smallest increase in several months. The rise in goods prices was mainly driven by used cars, which is not expected to be sustained.

• Gains in tsys came under brief pressure as the latest 10-year auction tailed despite an above-average bid/cover ratio.
• Cash ACGBs opened 5-7bp lower with the AU-US 10-year yield differential +2bp at -4bp.
• Swap rates are 6-7bp lower with EFPs little changed.
• The bills strip bull flattens with pricing flat to +12.
• RBA dated OIS opened 2-7bp softer for meetings beyond August. Terminal rate expectations sit at 3.90% (August).
• Australian Trade Minister Farrell will head to China today for the first in-person meeting since 2019.
• The local calendar is light today with May MI Inflation Expectations as the highlight.
• Further afield, we get China CPI/PPI data ahead of the BoE Rate Decision and US PPI.