Weaker, XM Near Session Lows, YM Is Mid-range

ACGBs (YM -2.0 & XM -6.0) sit weaker. XMU3 is currently trading close to its Sydney session lows, while YMU3 is in the middle of the trading range. The decline in the 10-year contract from its session highs is a result of US tsys pulling back from their morning highs after Fitch's downgrade of the US to AA+.

• According to MNI’s technicals team, XMU3 backtracked slightly despite the unchanged RBA rate decision yesterday. Nonetheless, the recent recovery is yet to encounter meaningful resistance - first crossing at 96.440. Moving average studies remain in bear mode, highlighting the trend direction. First support sits at the Dec 29 low of 95.670.
• Cash ACGBs are 1-6bp cheaper with the AU-US 10-year yield differential -3bp at flat.
• Expectations of sustained strong pricing at today's auction of the May-34 bond proved accurate, as the weighted average yield printed 1.0bp through prevailing mids. However, the cover ratio moved lower.
• Swap rates are 1bp lower to 5bp higher with the 3s10s curve twist steepening.
• The bills strip is richer with pricing +1 to +2.
• RBA-dated OIS pricing is 1-3bp softer across meetings.
• Tomorrow the local calendar sees Q2 Retail Sales Ex-Inflation and Trade Balance data. With nominal sales +0.4% q/q and prices +1.0%, the market is expecting -0.6% q/q.