US TSYS: Consolidate, Curve Flatter On Tuesday

ACGBs are firmer from the Asia-Pac close (YM +9.0 & XM +5.5) but re-open slightly softer in the Sydney session after news out over the weekend that UBS had taken over embattled Credit Suisse for around $2bn. Also, out is an announcement of coordinated central bank action to enhance the provision of U.S. dollar liquidity. Ahead of the weekend, U.S. Tsys bull steepened with 2-year and 10-year yields respectively 32bp and 15bp lower.

• Cash ACGBs open 6-8bp richer with the curve 3bp steeper.
• Swaps rates are 6-8bp stronger with the curve 3bp steeper.
• Bills are 6-17bp richer led by the whites.
• Last week the market moved to price an end to the tightening cycle. RBA dated OIS pricing opens holding Friday’s pricing with April meeting flat and 18bp of easing priced for year-end.
• The local docket is light with today’s (commencing soon at 2205 GMT) RBA Kent's speech “Long and Variable Monetary Policy Lags” at the KangaNews DCM Summit and RBA Minutes (Tue) the highlights.
• All eyes however will be on the FOMC meeting (Tue/Wed) to see if the Fed will keep monetary and financial stability decisions separate. BBG consensus currently expects a 25bp hike, although some analysts are expecting a no change decision.

AUD/USD got above 0.6740 in early trade this morning, with the USD generally weaker post the news of UBS taking over Credit Suisse. A number of major central banks (including the Fed and the ECB) have also announced measures to boost USD liquidity utilizing existing swap lines. The A$ is back lower now, last in the 0.6710/15 region, which leaves us around +0.25% above closing levels form last week.

• Offshore developments in the global banking space are likely to dominate A$ sentiment today. On Friday the currency rose around 0.6%, but lagged both yen and NZD gains amid a sharp pull back in US yields. The AUD/NZD cross is back sub 1.0700, while AUD/JPY is under 88.50 currency.
• In terms of technicals, the March 7 high at 0.6748 is an upside target, then 0.6784/87, which is the 1 Mar high and the 50-day EMA. On the downside, look for support around the 0.6590 level (the Mar 15 low).
• The local data calendar is quiet today, although we do have RBA Assistant Governor Kent speaking at the KangaNews DCM Summit in Sydney (09:05am Sydney time), which is in around 15mins.

NZGBs open 8bp richer across the curve after the stronger lead from U.S Tsys ahead of the weekend and news out over the weekend that UBS had taken over embattled Credit Suisse for around $2bn. Also, out is an announcement of coordinated central bank action to enhance the provision of U.S. dollar liquidity.

• Swaps are 7-8bp richer with the 2s10s curve unchanged.
• RBNZ dated OIS pricing opens little changed with April pricing showing 24bp of tightening and terminal OCR expectations at 5.27%.
• No major local data slated for this week. RBNZ Chief Economist Conway is however scheduled to give a speech: “The path back to low inflation in NZ” at a capital markets forum on Thursday.
• Across the Tasman, the local docket is also light with RBA Kent's speech at the KangaNews DCM Summit today (commencing soon 2205 GMT) and RBA Minutes the focus.
• Globally, all eyes will be on the FOMC meeting (Tue/Wed) to see if the Fed will keep monetary and financial stability decisions separate and raise the funds rate. BBG consensus is expecting a 25bp hike, although some analysts are expecting no move. Before recent adverse credit developments, there had been active discussion about a 50bp hike at the March meeting.