JGBS: Bear-Steepener At Lunch, Risk-On After US-CH Trade HLs

AUDUSD is approaching its earlier intraday high of 0.6291 and is currently 0.2% higher during today’s APAC session at 0.6290 as markets wait for details on US reciprocal tariffs due to be announced at 1600 ET or 0700 AEDT Thursday. The USD index is unchanged.

• Aussie strengthened further against the yen after the pair rose 0.2% yesterday. AUDJPY is up 0.3% to 94.21 today, close to the intraday high of 94.25. AUDEUR is 0.1% higher at 0.5825 and AUDGBP +0.2% to 0.4867. These gains could be unwound though if US tariffs are seen as worse than expected; a scenario which would likely drive a pullback in risk.
• The AUD is 0.1% lower against risk-sensitive kiwi at 1.1003. It has again found support at 1.1000 and is currently hovering around this level.
• Equities are mixed with the ASX up 0.2%, CSI 300 flat but the Hang Seng down 0.6% and S&P e-mini -0.1%. Oil prices are little changed with WTI around $71.20/bbl. Copper is up 0.3% and iron ore around $104/t.
• Apart from the US tariff announcement, the Fed’s Kugler speaks on inflation expectations and March US ADP employment and February orders are released. The ECB’s Lagarde, Schnabel and Lane talk. 

ACGBs (YM -1.0 & XM +1.0) are little changed after dealing in narrow ranges in today’s local session.

• There was a small payback in February non-house building approvals after the sharp rise over December/January. Nevertheless, looking through the volatility the total number is trending robustly higher. While it fell 0.3% m/m in February, less than expected, it was up 25.7% y/y after 21.6% and 3-month annualised momentum continues to run just under 30%. There has been a significant demand/supply imbalance in Australian housing and the positive trend in building approvals is welcome news.
• Cash US tsys are ~2bps cheaper after yesterday's modest gains ahead of Wednesday afternoon's Liberation (tariff) Day announcement from the White House (1600ET est). Trump's tariffs will take immediate effect after they are announced.
• Cash ACGBs are 1bp richer to 1bp cheaper, with the 3/10 curve flatter and the AU-US 10-year yield differential at +21bps.
• Swap rates are 2-3bps lower, with EFPs tighter.
• The bills strip is +1 to +2 across contracts beyond the first (-1).
• RBA-dated OIS pricing is slightly firmer today. A 25bp rate cut in May is given a 77% probability, with a cumulative 72bps of easing priced by year-end (based on an effective cash rate of 4.09%).

China will promote a pilot cash-pooling service nationwide for multinational companies to integrate domestic and foreign currency management, according to a draft statement released by the People’s Bank of China. The initiative, currently open for public feedback, further facilitates the transfer and use of funds, and reduces corporate costs. The pilot programme launched in Beijing and Shenzhen in 2021 before expanding to eight other regions in 2022. (Source: China Securities Journal)