Weaker, Awaits Federal Budget

ACGBs sit weaker (YM -5.0 & XM -7.0) but off session lows. The move away from session cheaps was assisted by US tsys which richened in Asia-Pac trade, partially unwinding weakness seen in yesterday’s NY session. At the time of writing, the 2- and 10-year cash benchmark yields were respectively 2bp and 1bp lower.

• The Federal Budget is scheduled for release after market close (1000 BST), with market expectations oscillating around the idea of a small surplus or deficit for FY23. As part of the budget announcement, the Treasurer is expected to unveil a range of policy initiatives to balance fiscal restraint with support for the most vulnerable members of society. These initiatives may include tax reforms, program changes, and household relief measures. If it turns out to be significantly expansionary, then RBA rate expectations may be affected.
• Cash ACGBs are 5-6bp cheaper with the AU-US 10-year yield differential at -3bp.
• Swap rates are 4-6bp higher with EFPs little changed and the 3s10s curve 2bp steeper.
• The bills strip twist steepens with pricing +1 to -5.
• RBA dated OIS is flat to 3bp firmer across meetings with early ’24 leading.
• The AOFM plans to sell A$800mn of the 3.25% 21 April 2029 bond tomorrow.
• There is no local data slated for tomorrow ahead of US CPI on Wednesday.