U.S. Tsy-Driven Moves

Aussie bonds followed the twist flattening theme in the U.S., with YM -2.5 and XM +8.5 at typing. Local focus fell on the (relatively limited) COVID cluster in Sydney, Barnaby Joyce regaining the leadership of the junior party within the government's ruling coalition and a slightly softer than expected round of preliminary retail sales data.

• The belly of the curve continues to struggle in relative terms, with 5s hitting the cheapest levels witnessed since Apr '18 on the 2-/5-/10-Year butterfly. A reminder that the comparable area of the U.S. curve has exhibited similar patterns in the wake of last week's FOMC decision, while the Aussie market also has to contend with the prospects of the major decisions to be made at the RBA's July decision (whether to roll the 3-Year yield target over to ACGB Nov '24 from ACGB Apr '24 and an announcement surrounding the next round of broader bond purchases), as well as last week's stellar domestic labour market report. The 2-Year sector of the curve is of course influenced by the RBA's current form of yield curve targeting.
• Weekly payrolls data headlines a relatively limited local docket on Tuesday.