Weaker, Heavy Calendar Today Ahead Of RBA Decision Tomorrow

ACGBs are weaker (YM -10.0 & XM -8.5) after Friday’s outsized change in US non-farm payrolls at 339k Vs 195k expected, along with positive revisions to the prior readings. US tsys were sharply higher in trading ahead of the weekend with 2-year and 10-year yields finishing 16bp and 10bp higher respectively.

• Cash ACGBs opened 9bp cheaper with the AU-US 10-year yield differential at +4bp.
• Swap rates opened 7-9bp higher with the 3s10s curve 1bp flatter.
• The bills strip is steeper with pricing flat to -12.
• This week's focal point undoubtedly is tomorrow's RBA Policy Decision. While the BBG consensus anticipates no change, it is important to note that this view is not unanimous. Moreover, RBA dated OIS currently attaches a 55% chance of a 25bp hike at tomorrow’s RBA meeting.
• The meeting holds significance as the case for a further rate increase is likely to be seriously discussed. This discussion gains weight following the surprising April Monthly CPI Indicator, which revealed an upside in inflation. The annual rate of inflation jumped from 6.3% to 6.8%, surpassing the consensus estimate of 6.4%.
• Today, 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).