AUSSIE BONDS: Follow US Tsys Into A Bull-Flattener, RBA Remains Cautious
Apr-15 05:10
ACGBs (YM +2.0 & XM +7.0) are showing a bull flattener in today’s Sydney session.
- The release of the RBA Minutes for the April Meeting was the key domestic driver. The Board judged that economic conditions were broadly in line with forecasts, with inflation gradually declining and the labour market still tight.
- Risks to the outlook were seen as balanced, including global trade uncertainty and domestic factors like wages and productivity.
- Given this, the Board decided to keep the cash rate unchanged, emphasising the need for caution. Future decisions will depend on incoming data, especially on inflation, employment, and global developments.
- Cash US tsys are flat to 4bps richer, with a flattening bias, in today's Asia-Pac session.
- Cash ACGBs are 1-7bps richer with the AU-US 10-year yield differential at -2bps.
- The bills strip has bull-flattened, with pricing flat to +6.
- RBA-dated OIS pricing is flat to 3bps softer across meetings today. A 50bp rate cut in May is given a 36% probability.
- Tomorrow, the local calendar will see the Westpac Leading Index, ahead of March’s Employment Report on Thursday.
- The AOFM plans to sell A$1000mn of the 3.50% 21 December 2034 bond tomorrow.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
