AUSSIE BONDS: AUCTION PREVIEW: ACGB Mar-36 Supply Due

ACGBs (YM +1.0 & XM +0.5) are slightly stronger after US tsys finished near midday bests Tuesday. 

• US President Trump has spoken at a rally on his first 100 days in office. He stated that tax cuts will be passed in the coming weeks/months.
• On trade/tariffs, he noted he had given flexibility for the auto sector, but stated that automakers will be slaughtered if they don't onshore production.
• On trade deals, he stated that officials from India, France and China are coming to make deals, but didn't provide any more details than that.
• Cash ACGBs are flat to 2bps richer with the AU-US 10-year yield differential at +2bps.
• Swap rates are 1-2bps lower.
• The bills strip has twist-flattened, with pricing -2 to +2.
• RBA-dated OIS pricing shows a 50bp rate cut in May as a 10% probability, with a cumulative 116bps of easing priced by year-end.
• Today, the local calendar will see Q1 CPI. It is forecast to show the RBA's preferred trimmed mean falling below the top of the 2-3% target band for the first time since Q4 2021. This should signal another 25bp cut on May 20. Retail sales are on Friday. The Federal Election is on Saturday.
• The AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Friday.

Japan March preliminary industrial production was below market forecasts, down 1.1%m/m, versus -0.4% expected. In y/y terms we came in at -0.3% versus 0.8% forecast (0.1% was the prior outcome). 

• The y/y trend hasn't been able to see much upside traction for a number of years now. The current y/y pace is slightly above averages for 2023/24 but only marginally.
• By sub-sector, capital goods production rose 0.6%m/m, but ex transport was negative m/m. Shipments were negative. Durable consumer goods saw a sharp 6.5% fall, while non-durable consumer goods were also down. A government official also noted the sharp falls in motor vehicle production in March (down 5.9%m/m) due to lower exports and supply constraints (per RTRS).
• METI still looks for solid rises in output for April and May, although the trade/tariff outlook may derail such projections. 

US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light. 

• On monetary policy, Trump reiterated progress around lower food and energy inflation and that lower interest rates are good. He added he knows more about interest rates than Fed Chair Powell does.
• He also stated that tax cuts will be passed in the coming weeks/months.
• On trade/tariffs, he noted he had given flexibility for the auto sector (which appears to reflect recently announced shifts), but stated that auto-makers will be slaughtered if they don't onshore production.
• On trade deals he stated that officials from India, France and China are coming to make deals, but didn't provide any more details than that. He added that if negotiations take too long then the US will set the tariff rate.
• He also emphasized the previously announced investment pledges that tech companies have agreed to.