Weaker, Narrow range, Headlines Watch

ACGBs are weaker (YM -5.0 & XM -4.5) sitting at Sydney session lows after a narrow range.

• The Judo Bank preliminary PMIs eased in May but still show growth but at a slower pace and driven by services. The composite moderated to 51.2 from 53, services to 51.8 from 53.7 and manufacturing steady at 48, the 6th consecutive contraction. The increase in services employment and higher output inflation are concerning elements of the report. The data had little impact on the market.
• Without domestic drivers, local participants are likely on headlines and Us tsys watch. US tsys have twist flattened in Asia-Pac trade with yields -1bp to +1bp.
• Cash ACGBs are 3bp cheaper with the AU-US 10-year yield differential-1bp at -9bp.
• Swap rates are also 3bp higher.
• The bills strip is steeper with pricing flat to 5.
• RBA dated OIS opened 1-3bp firmer across meetings.
• Bloomberg reports that Victoria must delay the start of major infrastructure projects including the Geelong Fast Rail and Melbourne Airport rail link to take control of its parlous finances, according to leading economist Saul Eslake. (link)