Weaker, US Tsys Cheaper, Stagflation-Like US GDP

ACGBs are cheaper (YM -6.0 & XM -5.5) as Q1 US GDP data drives US Tsy yields higher. After the NY bell 2-year and 10-year yields were respectively 11bp and 7bp higher.

• US Q1 GDP data showed weaker-than-expected growth and strong inflation, with a potential stagflation trend. The annualized growth was 1.1% (1.9% est.), and the core PCE deflator was 4.9% (4.7% est.). This implies that the March PCE deflator reading, which is set to be released later today, will likely show a rebound to +0.5% M/M (compared to the consensus estimate of +0.3%).
• Cash ACGBs opened 6bp cheaper with the AU-US 10-year yield differential -1bp at -10bp.
• Swap rates are 5-6bp higher with the 3s10s curve little changed.
• Bills strip is steeper with pricing -3 to -9.
• RBA dated OIS opened flat to 7bp firmer across meetings.
• The local calendar sees the release of March Private Sector Credit and Q1 PPI. PPI should moderate reflecting declining goods and energy prices.
• Elsewhere, the BoJ is scheduled to deliver its Policy Decision.
• ABC News reported Former PM Keating has warned the RBA Review recommendation to strip the federal government of its power to overrule an RBA decision goes against democratic norms. He said had threatened to use the power as Treasurer in the late 1980s.