Weaker, No Budget Reaction, Awaiting US CPI

ACGBs are slightly weaker (YM -2.0 & XM -1.5) after a relatively calm NY session. There was little initial market reaction to the Federal Budget, with the improved fiscal outlook well anticipated.

• The Australian Budget showed much better fiscal metrics than October, with a small surplus for FY23 and smaller projected deficits in the out years. Commodity prices, inflation, and the labour market contributed to the A$120bn improvement in the budgetary starting position.
• The government prioritised cost-of-living relief with net new policy costs for the next three years equivalent to 0.76% of GDP. This is an expansive budget compared to historical standards.
• The improved budget position and lower long-term bond rates have resulted in a significant reduction in the federal debt profile. Net new funding for FY24 has improved by circa $30bn, relative to the previous budget, leading to a likely further downward revision to the bond tender program. Market participants await an AOFM issuance update.
• Treasurer Chalmers gives his post-Budget address at 0330 BST / 1230 AEST.
• Cash ACGBs opened 1-2bp cheaper with the AU-US 10-year yield differential at -5bp.
• Swap rates opened 1-2bp higher.
• Bills pricing is -1 to -3.
• RBA dated OIS opened flat to 2bp firmer.
• There is no local data slated ahead of US CPI later today.
• The AOFM plans to sell A$800mn of the 3.25% 21 April 2029 bond today.