RBA: Lowe Stresses Need For Productivity Growth

JGB futures added to the post-BoJ decision richening in overnight trade ahead of the weekend, closing at 148.80, +20 compared to settlement levels. Cash US tsys finished 6-11bp stronger across the curve in NY trade on Friday following some hopeful signs that services sector inflation was receding. Non-housing core services (Bloomberg’s calculation) cooled from +0.35% M/M to +0.2%, the softest print since Jul’22.

• JBM3's strong recovery from 147.27, the April 18 low, confirms the corrective nature of the pullback between March 22- April 18, according to MNI’s technical analyst. Attention remains on 149.53, the March 22 high.
• On Friday, the BoJ announced that it would maintain its ultra-easy policy settings but removed its forward guidance on rates, which is intended to provide more flexibility in future policy decisions. Although this appeared to signal a shift towards a more policy-neutral outlook, the BoJ will conduct a formal long-term review of monetary policy, which is expected to take 12-18 months. As a result, market expectations for a swift normalisation of policy were tempered, despite Governor Ueda's statement that policy changes, including normalisation, could be made during the review process.
• The local calendar is light today with April’s Jibun Bank Mfg PMI (Final) and Consumer Confidence slated for release.

ACGBs are richer (YM +2.0 & XM +3.5) after cash US tsys finished 6-11bp stronger across the curve in NY trade ahead of the weekend following some hopeful signs that services sector inflation was receding.

• Cash ACGBs are 2-3bp richer with the AU-US 10-year yield differential +2bp at -12bp.
• Swap rates opened 2-3bp lower with EFPs little changed.
• The bills strip has twist flattened with pricing -3 to +2.
• The RBA is expected to remain on hold at its policy decision meeting on Tuesday, taking advantage of the Q1 core CPI undershoot to assess the impact of the 350bp of tightening that has been delivered.
• RBA dated OIS opened 1bp softer to 4bp firmer across meetings with a 12% chance of a 25bp hike priced for tomorrow’s meeting.
• CoreLogic House Price has shown further signs of stabilisation In April by printing +0.7% M/M after +0.8% in March.
• The local calendar sees the release of April’s Judo Bank Mfg PMI, MI Inflation Gauge and ANZ Job Ads.
• Elsewhere, China’s Official Manufacturing PMI, released on Sunday, declined to 49.2 from 51.9 in March. The Non-Manufacturing PMI also fell to 56.4 from 58.2.
• The global calendar sees US ISM Manufacturing PMI slated for release today ahead of Wednesday’s FOMC policy decision. The ECB is scheduled to deliver its policy decision on Thursday.

USD/CNH prints at 6.93/94 little changed from Friday's closing levels.

• The pair sit above its 20-Day EMA (6.9052) and a touch off the high 25 Apr (6.9508). On the downside the 200-Day EMA (6.8741) is providing support.
• Chinese factory activity unexpectedly shrank at the weekend, Manufacturing PMI printed at 49.2 in April falling from 51.9 in March. Non-manufacturing printed 56.4 in April vs 58.2 in March.
• Domestic markets are closed for the next 3 days for the observance of a national holiday.