Weaker, Tracking US Tsys, Gov. Lowe's Testimony Offers Few Surprises

ACGBs (YM -4.0 & XM -5.5) are weaker and at Sydney session lows. While RBA Governor Lowe’s appearance before Parliament has been in progress for a couple of hours, the direction in the local market appears more linked to US tsys testing overnight lows in Asia-Pac trade.

• In his testimony, Governor Lowe highlighted two risks that will help determine the policy path. The first was household consumption and services inflation was the second. These are familiar themes. In summary, Lowe described the RBA as still being largely in watch-and-wait mode, particularly in terms of these two factors outlined above. Note we get Q2 wages data next Tuesday.
• Bloomberg reports Australia’s central bank chief Philip Lowe said monetary policy has now entered a “recalibration phase” under which the board will likely only need to make small adjustments in response to data. (See link)
• Cash ACGBs are 4-6bp cheaper with the AU-US 10-year yield differential unchanged at -3bp.
• Swap rates are 4-5bp higher.
• The bills strip twist steepens with pricing +1 to -5.
• RBA-dated OIS pricing is 1bp firmer across meetings.