AUSSIE BONDS: Little Changed After Jobs Data, UE Unchanged & In Line With Est.

USD/JPY sits comfortably off earlier highs, last near 144.80/85, close to intra-session lows from Monday (144.67). Earlier highs in the pair were just above 145.50. Catalyst for the move lower were remarks by Japan FinMin Kato, where he stated that a meeting was being arranged with US Tsy Bessent to discuss topics, including FX. 

• Kato stated: "IN PREVIOUS BILATERAL MEETING WITH BESSENT, TWO SIDES CONFIRMED FX RATES SHOULD BE SET BY MARKETS AND THAT EXCESS VOLATILITY IN FX MARKET HAS ADVERSE IMPACT ON ECONOMY - [RTRS]".
• Kato added further talks will be aimed at maintaining this existing stance (per BBG).
• If the current status quo is maintained, then not much changes from a broader FX standpoint between the two countries. Still, markets will be mindful of how discussions might evolve on this issue, and how they fit within the context of broader trade discussions.
• In terms of downside levels, in the short term note the following support points. SUP 1: 144.67/143.45 Low May 19 / Low May 8.       

ACGBs (YM +3.0 & XM +6.5) are stronger ahead of today’s RBA Policy Decision. 

• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's modest gains.
• (Bloomberg) -- “House Speaker Mike Johnson said “we are almost there” on passing a sweeping US tax bill. Republicans are pushing to implement Medicaid work requirements in 2027, two years earlier than planned, Majority Leader Steve Scalise told CNBC.”
• Today, the local calendar will see the RBA Policy Decision, with a 25bp rate cut to 3.85% widely expected (31/33 analysts on Bloomberg are forecasting -25bp with two expecting -50bp). This comes after Q1 trimmed mean CPI fell within the 2-3% target band, with activity, especially consumption, remaining lacklustre.
• After stronger-than-expected Q1 wages and April employment data, the central bank is likely to retain its cautious tone though regarding the data-dependence of future easing and reiterate that uncertainty is very high. (See MNI RBA Preview here)
• Cash ACGBs are 4-6bps richer with the AU-US 10-year yield differential at +2bps.
• The bills strip has bull-flattened, with pricing +1 to +3.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut today is given a 95% probability, with a cumulative 77bps of easing priced by year-end.

China’s infrastructure investment rose by 5.8% y/y from January to April, supported by the acceleration in issuance of local government special bonds earmarked for project development, according to Wang Qing, Chief Macro Analyst at Oriental Jincheng. Wang noted that, since the beginning of the year, medium- and long-term corporate lending for infrastructure projects has sustained robust growth. Meanwhile, local governments have regained momentum in project spending, aided by an easing of fiscal pressures following the debt relief programme. (Source: Yicai)