AUSSIE BONDS: Modestly Richer Despite Stabilisation In Bus Conf

ACGBs (YM +2.5 & XM flat) are slightly stronger.

• There seemed some stabilisation in the private sector in May with NAB business conditions stable at +3 and confidence improving substantially to -14 from -23. However, Q2 averages are signalling growth slowed in the quarter. Price/cost increases moderated from April but remained elevated compared to pre-Iran War rates and are signalling upside risks to Q2 CPI. The RBA remains alert to signs of a greater or faster pass through of higher costs to consumers and while the NAB survey shows some easing in the size of price rises they remain inconsistent with the inflation target.
• Cash US tsys are ~1bp richer in today's Asia-Pac session after finishing Monday's session showing a modest bear-steepener. The focus is on Wednesday's CPI data.
• Cash ACGBs are flat to 2bps richer with the AU-US 10-year yield differential at +37bps, around lowest this year.
• The bills strip has bull-flattened, with pricing +1 to +4 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 6% for June to 66% by September and 98% by December 2026.
• Tomorrow, the local calendar will be empty.  
• The AOFM plans to sell A$1000mn of the 4.75% 21 October 2037 bond tomorrow.