AUSSIE BONDS: Cheaper With US Tsys, Awaiting RBA Decision
ACGBs are cheaper (YM -7.0 & XM -7.5) ahead of today’s RBA Policy Decision. US tsys yields were sharply higher in NY trade after the April ISM Manufacturing Prices Paid component surpassed anticipated values, registering 53.0 compared to the expected 49.0. Additionally, Bloomberg reported that JP Morgan has reached an agreement to acquire First Republic Bank in a government-assisted deal, with JP Morgan and the FDIC agreeing to jointly absorb any losses incurred.
- Cash ACGBs opened 6-8bp cheaper with the AU-US 10-year yield differential -3bp at -14bp.
- Swap rates opened 5-8bp higher with the 3s10s curve 3bp steeper.
- The bills strip is steeper with pricing -3 to -6.
- The RBA is expected to remain on hold at its policy decision meeting today (0530 BST), taking advantage of the Q1 core CPI undershoot to assess the impact of the 350bp of tightening that has been delivered. The focus is likely to be on the tone of the statement.
- RBA Governor Lowe is scheduled to deliver a speech at 1220 BST.
- RBA dated OIS opened 1-6bp firmer across meetings with an 11% chance of a 25bp hike priced for today's meeting. Terminal rate expectations (August) opened 3bp firmer at 3.73% for a cumulative tightening of 16bp.
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MNI: US BANKS DEPOSITS DECLINE $126B WEEK ENDING MARCH 22
- MNI: US BANKS DEPOSITS DECLINE $126B WEEK ENDING MARCH 22
- FED DATA: SMALL BANKS' DEPOSITS UP $6B IN WEEK TO $5.39T
- FED DATA: LARGE BANKS' DEPOSITS DOWN $90B IN WEEK TO $10.65T
USDCAD TECHS: Heading South
- RES 4: 1.3898 High Oct 14
- RES 3: 1.3805/3862 High Mar 24 / 10 and the bull trigger
- RES 2: 1.3745 High Mar 27
- RES 1: 1.3593/3649 50- and 20-day EMA values
- PRICE: 1.3540 @ 08:04 BST Mar 31
- SUP 1: 1.3517/15 100-dma / Low Feb 22
- SUP 2: 1.3491 61.8% retracement of the Feb 2 - Mar 10 rally
- SUP 3: 1.3442 Low Feb 20 / 21
- SUP 4: 1.3404 76.4% retracement of the Feb 2 - Mar 10 rally
The current bear cycle in USDCAD remains in play and the pair continues to weaken. This week’s bearish extension has resulted in a break of the 50-day EMA and 1.3562, the 50% retracement for the Feb 2 - Mar 10 rally. The move lower signals scope for a continuation towards 1.3491, the 61.8% retracement. On the upside, initial firm resistance is seen at 1.3649, the 20-day EMA.
US TSYS: Tsys Near Wk Highs Into Month/Quarter End
- Treasury futures are pushing late session highs, volumes climbing into the month/quarter end, front month 10Y futures traded over 300k from 114-28 to 115-01 high (+14.5), 10Y yield down to 3.4752% low.
- Little market reaction to NY Fed Williams' economic outlook speech to the Housatonic Community College in Connecticut. "I expect inflation to decline to around 3-1/4 percent this year, before moving closer to our longer-run goal in the next two years," he added, slightly increasing his forecast a quarter point since mid-February.
- Fed speakers still scheduled for this evening: Fed Gov Cook, eco outlook/mon-pol, Midwest Economics Assn at 1745ET; Fed Gov Waller re: Phillips curve, text, no Q&A at 2200ET.
- Yield curves flat to mildly steeper (2s10s -57.487 +.205), well off session lows as Jun'23 2Y futures making new late session highs (TUM3 103-08, +3.0), 2Y yield marks session low of 4.0459%.
- Implied May Fed hike pricing fell from 16bp to 13.5bp after that soft Feb PCE report, but it's since bounced back to 14.4bp. The soft services ex-housing number is key to any Fed pause narrative but as we noted earlier, the April 28 PCE release will carry far more weight for FOMC Fed going into the May 3 decision. Let alone the rest of the year, for which 55bp of cuts from peak are priced (basically unchanged from pre-data).
