Weaker, Ahead of New Dec-34 ACGB Pricing

ACGBs are weaker (YM -6.0 & XM -4.5) consolidating yesterday’s post-RBA Minutes cheapening. The Minutes confirmed that a 25bp hike had been discussed and stressed that rate hikes at future meetings may be needed depending on how the economic data played out. There was little movement in US Tsys in NY trade despite a raft of economic data and US earnings.

• After the bell, the US Tsy 2/10 cash curve had flattened with the 2-year little changed and the 10-year yield 2bp lower. Fed’s Bullard called for higher rates while avoiding “extensive forward guidance at the next FOMC meeting.” Pricing for the May FOMC held steady with an 86% chance of a 25bp hike priced.
• Cash ACGBs are 4-5bp cheaper with the AU-US 10-year yield differential +6 at -6bp.
• Swap rates opened 4-5bp higher with the 3s10s curve 2bp flatter.
• Bills pricing is 4-6 weaker.
• RBA dated OIS opened 1-4bp higher after firming 5-8bp post-Minutes yesterday.
• The local data calendar is light today with Westpac’s Leading Index (April) as the highlight.
• The main event will be the pricing of the syndicated new Dec-34 ACGB. Initial price guidance for the issue is a spread of 8.5 to 11.5bp over the implied bid yield for the 10-year bond futures contract.