AUSSIE BONDS: Rally Extends After Israel Strike On Iran

TYM5 is trading 110-02+, up 0-03 from its close. 

• The US 2-year yield opens around 4.06%, up 0.01 from its close.
• The US 10-year yield opens around 4.476%, up 0.01 from its close
• MNI US - The nonpartisan Joint Committee on Taxation has issued a positive assessment of the revenue implications of the House Republican tax bill. The House Ways and Means Committee is scheduled to mark up the bill today as part of President Donald Trump's 'One Big Beautiful' Bill to legislate his domestic agenda.
• The US Treasury recorded a $258 billion budget surplus in April, the largest since 2021.
• Receipts were driven by a 16% increase in individual tax payments, which totaled $460 billion. 
• Furthermore, the Treasury reported that customs duties rose $9 billion year-over-year in April to a record $16 billion.
• The 10-year Yield range seems to be 4.10% - 4.5%, price is currently testing the upper bound of the range around 4.50%. A sustained break above this level would see another round of selling targeting the 4.75% area.
• Data: US MBA Mortgage Applications 

ACGBs (YM -4.0 & XM -5.0) are weaker despite US tsys finishing Tuesday's NY session little changed.

• There is little in this report alone to suggest a meaningful gap between CPI and PCE-in other words, the slight downside miss in core CPI doesn't carry a major re-interpretation for PCE via the components.
• “BoA FMS: Most global investors have been underweight US equities, missing the stock market rebound of the past month, and could now be forced to chase the rally following positive developments in US-China trade talks, according to the Bank of America global fund manager survey.” (per BBG)
• Cash ACGBs are 4-5bps cheaper with the AU-US 10-year yield differential at +1bp.
• The bills strip has bear-steepened, with pricing flat to -5.
• RBA-dated OIS pricing is mostly firmer across meetings today. A 25bp rate cut in May is given a 96% probability, with a cumulative 78bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will see Q1 Wage Price Index and Home Loans data.
• AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond today and A$800mn of the 2.50% 21 May 2030 bond on Friday.