AUSSIE BONDS: Modestly Cheaper After CPI Beat, Chance 50bp Cut In May Gone

JGB futures are sharply higher and at session highs, +44 compared to settlement levels.

• Outside of the previously outlined IP and Retail Sales, Housing Starts printed +2.4% y/y in February vs. est. -2.2%.
• Cash US tsys are 4-6bps richer in today's Asia-Pac session as concern over the health of the US economy fuels demand for haven assets. On Friday, a strong risk-off tone pushed the US 10-year 11bp lower ahead of this week's Trump Tariff "Liberation Day" rollout on April 2, not to mention Friday's employment data for March.
• Cash JGBs are flat to 4bps richer across benchmarks out to the 30-year, with the belly leading. The benchmark 10-year yield is 3.2bps lower at 1.511% versus the cycle high of 1.596%.
• The 2-year yield is 1.8bps lower at 0.854% after today’s supply. The 2-year bond auction showed improved demand today. The low price came in slightly above the forecasted 100.055, according to a Bloomberg poll, while the cover ratio rose to 3.4085x from 3.1637x. The auction tail also shortened slightly compared to the previous month.
• Swap rates are 1-32bps lower. Swap spreads are mixed.
• Tomorrow, the local calendar will see the Jobless Rate, Job-To-Applicant Ratio, Tankan Survey and Jibun Bank PMI Mfg data.

China Resource’s Gas Group shares are down by the most in over a year as net income missed estimates by 26% as a result of the property market malaise. 

Thailand’s markets have re-opened as investors are assured that damage is limited to key infrastructure. 

As China’s banks are to be recapitalized, the stock prices are providing a mixed reaction to the news of the US$67bn capital injection.

CK Hutchison’s shares are down almost 5% on rumours its sale of its Panama Canal ports may be delayed. 

• China’s equity markets are down heavily today with the Hang Seng down -1.7%, CSI 300 down -1.00%, Shanghai down -0.95% and Shenzhen down -2.05%.   
• The KOSPI is one of the worst regional performers, falling by -2.9% marking a horror three days of losses.
• Other markets in the region have no where to hide with the Taiwan’s TAIEX down -3.43% as outflows continue and Philippines down -0.47% with Malaysia, Singapore and Indonesia out.
• India’s NIFTY 50 has had a very strong few weeks, but as it opens up this morning it is weaker by -0.30%

ACGBs (YM +8.0 & XM +9.5) are stronger but off session bests, aligning with a slight paring of early gains for US tsys in today’s Asia-Pac session. Currently, cash US tsys are 4-6bps richer after Friday’s strong risk-off-induced rally. 

• Outside of the previously outlined private sector credit and MI inflation gauge, there hasn't been much by way of domestic drivers to flag ahead of tomorrow’s RBA Policy Decision.
• While a 25bp rate cut in April is given only a 5% probability, a cumulative 71bps of easing is priced by year-end. The market’s reluctance to price in a cut for tomorrow reflects the RBA’s cautiousness surrounding February's easing.
• Cash ACGBs are 7-9bps richer with the AU-US 10-year yield differential at +17bps.
• Swap rates are 6-7bps lower, after being 10-11bps lower early.
• The bills strip has bull-flattened, with pricing +4 to +8.
• Tomorrow, the local calendar will see Retail Sales ahead of the RBA Decision, with the market expecting a rise of 0.3% m/m in February after 0.3%.
• After today’s May-28 supply, the AOFM plans to sell A$800mn of the 3.75% 21 May 2034 bond on Wednesday and A$600mn of the 1.00% 21 November 2031 bond on Friday.