Weaker, At Session Cheaps, Awaits US Payrolls

ACGBs sit weaker (YM -7.0 & XM -3.0), near Sydney session cheaps as local participants focus on the possible implications of the Australian Fair Work Commission’s decision to lift the minimum wage by 5.75%.

• Cash ACGBs are 2-7bp cheaper with the 3/10 curve 5bp flatter and the AU-US 10-year yield differential +7bp at +3bp.
• Swap rates are 3-6bp higher.
• The bills strip bear flattens with pricing is -9 to -4.
• The local calendar is heavy next with the focal point likely to be RBA Policy Decision on Tuesday. BBG consensus is expecting a no-change outcome although it is not unanimous.
• While not expecting a hike until August, ANZ today announced an increase in its terminal cash rate forecast to 4.35% from 4.10% (link). They join several other sell-side economists who have turned more hawkish in terms of the RBA outlook (link).
• RBA dated OIS is 4-10bp firmer across meetings with a 56% chance of a 25bp hike in June priced. It was a 40% chance at the opening of trade today.
• On Monday, the local calendar is scheduled to release Judo Bank PMIs (May F), MI Inflation Gauge (May), Inventories (Q1), Company Profits (Q1) and ANZ Job Ads (May).
• The AOFM announced plans to sell A$700mn of the 3.75% 21 May 2034 bond on Wednesday.