AUSSIE BONDS: Marginally Richer Start, Employment Data On Tap
ACGB's have opened dealing 1-3bps richer across the major benchmarks. The curve has bull flattened.
- This comes after the US Tsy curve flattened as the Fed kept rates steady, as expected. There was a hawkish tilt to the forward guidance with 12 out of 18 Fed officials expecting another 50bps of hikes later this year.
- XM and YM are little changed in early dealing.
- RBA dated OIS is stable, a terminal rate of ~4.50% is seen in November.
- On the wires today we have the May Labour Market Report, the Unemployment Rate is seen holding steady at 3.70%. June Consumer Inflation Expectations will also cross.
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AUD: AUD/JPY: Firms Through 20- and 200-Day EMAs On Monday
AUD/JPY rose ~1.1% on Monday; firmer risk appetite, commodity prices and US Treasury Yields saw the pair rise above the ¥91 handle.
- The ¥90 handle provided support late last week before yesterday's impressive rally. We now sit above the 20- and 200-Day EMAs, however for the most part AUD/JPY has observed a ¥88/92 range in 2023 with the pair unable to sustain breaks of either handle.
- Bulls first target the high from 2 May at ¥92.44, a break through here opens ¥93.04 high from Feb 15.
- Bears immediate focus is on ¥90.78 (200-Day EMA), with the 20-Day EMA (¥90.39) providing the next support level.
- On the wires today we have the RBA Minutes of the May Policy meeting when the RBA unexpectedly raised the cash rates 25 bps.
Fig 1: AUD/JPY Daily Spot, EMAs
Source: MNI/Bloomberg
JGB TECHS: (M3) Bullish Recovery
- RES 3: 151.26 - High Mar 3 2022
- RES 2: 149.75/150.81 - High Nov 11 / High Aug 5 2022
- RES 1: 149.53 High Mar 22
- PRICE: 148.69 @ 16:01 BST May 15
- SUP 1: 147.31/27 - 50-day EMA / Low Apr 18
- SUP 2: 145.80/144.73 - Low Mar 13 / Low Feb 13
- SUP 3: 144.15 - Low Jan 13
JGBs has continued to appreciate, confirming an extension of the current short-term bull cycle. The strong recovery from 147.27, the Apr 18 low confirms the corrective nature of the pullback between Mar 22 - Apr 18. Attention remains on 149.53, the Mar 22 high and the bull trigger. A break of this level would confirm a resumption of the uptrend. To the downside, the 50-dma provides support at 147.31, just above the Apr 18 low.
AUSSIE BONDS: Cheaper With US Tsys Ahead of RBA Minutes
ACGBs are weaker (YM -7.0 & XM -5.0) following the negative lead from US tsys in NY trading. Although Treasury yields briefly dipped after the release of a weaker-than-expected Empire Manufacturing Index, they quickly rebounded and held steady for the remainder of the session. The market saw a surge of corporate issuance, which added pressure on rates, and more is expected tomorrow.
- Additionally, comments from Fed Bostic (non-voter) on sticky inflation not coming down fast enough put further downward pressure on bond prices.
- Meanwhile, Fed Funds implied rates rose higher on the day, ahead of the release of US retail sales data and another busy schedule of Fed speakers.
- Cash ACGBs opened 5-7bp cheaper with the AU-US 10-year yield differential +3bp at -3bp.
- Swap rates opened 5-7bp higher with the 3s10s curve flatter.
- The bills strip is steeper with pricing -3 to -7.
- RBA dated OIS opened 5-7bp firmer for meetings beyond September.
- The focus will be on the release of Australia's RBA Minutes for May with analysts looking for more insights after the unexpected 25bp hike. RBA Governor Lowe has already spoken publicly since the May decision stating that the board responded to signs of a tight labour market, persistent service inflation and changing asset prices.
