Weaker, Near Session Cheaps, Pressured By PBoC’s Decision To Leave The 5Y LPR Unchanged

ACGBs (YM -1.0 & XM -2.0) are weaker and near Sydney session cheaps. With the local calendar light today, local participants have been on headlines and US tsys watch.

• Against consensus expectations, the China 5-yr LPR was left unchanged at 4.20%, versus a forecast of 4.05%. The 1yr LPR was cut by 10bp to 3.45%. The consensus had been for this rate to fall to 3.40%. At the margin, the market was disappointed, particularly in terms of no change to the 5yr LPR rate, as these longer-term rates tend to feed into home mortgage rates etc. So, it may dent sentiment around expectations for the housing market.
• US tsys sit 1-3bp cheaper in Asia-Pac trade, with the curve steeper.
• The cash ACGB curve has bear steepened, with yields flat to 2bp higher. The AU-US 10-year yield differential is 4bp tighter at -3bp.
• Swap rates are flat to 1bp higher, with the 3s10s curve steeper and EFPs little changed.
• The bills strip is mixed, with pricing -1 to +1.
• RBA-dated OIS is little changed, with a 5% chance of a 25bp hike in September priced.
• This week the local calendar is very light, with Judo Bank PMIs on Wednesday being the only release.