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Weaker, Off Cheaps, Awaits WPI

AUSSIE BONDS

ACGBs sit weaker (YM -3.0 & XM -2.0), off session cheaps, after the RBA Minutes signalled that the May decision to hike 25bp was a close call, with a no change outcome discussed. Members acknowledged the significant uncertainties surrounding the economic outlook, but on balance, they judged that a further increase in interest rates was warranted to bring inflation back to target.

  • Richer US tsys in Asia-Pac trade also assisted the move off session lows.
  • Cash ACGBs are 2bp richer after the Minutes release to be 2bp cheaper on the day with the AU-US 10-year yield differential +2bp at -4bp.
  • Swap rates are 1-2bp higher on the day with the 3s10s curve flatter.
  • Bills are 2bp stronger after the Minutes with pricing flat to -3.
  • RBA-dated-OIS are slightly softer after the Minutes, sitting 1bp softer to 2bp firmer across meetings.
  • Tomorrow sees the release of the Wage Price Index for Q1. After last quarter’s surprisingly soft print despite the minimum wage lift, the market will be watching to see if that result is reversed in Q1.
  • Until then, all eyes will be on global bonds as they navigate Q1 GDP in the Euro Area and April Retail Sales in the US.
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