AUSSIE BONDS: Richer With Risk-Off After Israeli Strike On Iran

ACGBs (YM -3.0- & XM -4.5) are weaker but stronger than levels seen shortly after the Q1 Wage Price Index (WPI) surprised on the upside.

• "Seasonally adjusted private sector annual wage growth was unchanged from the December quarter at 3.3 per cent. Annual public sector wage growth was higher than the private sector at 3.6 per cent in the March quarter 2025, up from 2.9 per cent in the December quarter 2024." (per ABS)
• There has been no net movement in cash US tsys in today's Asia-Pac session.
• Cash ACGBs are 3-5bps cheaper with the AU-US 10-year yield differential at +1bp.
• The latest ACGB Dec-34 supply achieved a weighted average yield 0.46bp through prevailing mids. However, the cover ratio declined to 3.1708x from 3.9900x.
• The bills strip has bear-steepened, with pricing flat to -5.
• RBA-dated OIS pricing is mostly firmer across meetings today, with early 2026 leading. 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%).
• Tomorrow, the local calendar will see the April Employment Report.
• AOFM plans to sell A$800mn of the 2.50% 21 May 2030 bond on Friday.

G10 forex moves have been fairly modest in Wednesday trade to date. The USD BBDXY index sits little changed, while the DXY index is down a touch, largely due to modest yen gains. This follows Tuesday's USD pullback, which was helped by the downside miss from the US CPI print. 

• Cross asset trends have been fairly muted, with US equity futures little changed, while US Tsy yields have also been very steady. Gold and oil are slightly weaker. Regional equity sentiment is mixed. Tech plays are outperforming, except for Japan markets.
• We had Japan PPI print earlier, which was close to expectations at 4.0% y/y. It doesn't imply a shift in the CPI outlook and is just off recent highs. Import prices were down over 7% y/y.
• USD/JPY has mostly drifted lower, down around 0.35%, last under 147.00. Note the 50-day EMA is at 146.28, in terms of potential downside support.
• Australian Q1 wages data was stronger than expected, but the A$ couldn't regain the 0.6500 handle (highs of 0.64870 and we last tracked near 0.6475.
• In NZ, card spending figures suggested a still fairly sluggish consumer spending backdrop, but NZD was unmoved. We track near 0.5945 in latest dealings, a touch up from end NY levels on Tuesday.
• Looking ahead, on the data front we have final German inflation for April. In the US, mortgage applications are due. We have some central bank speak as well. 

NZGBs closed 7-10bps cheaper, underperforming its $-bloc counterparts. The NZ-US and NZ-AU 10-year yield differentials closed respectively wider by 3bps and 5bps. 

• There has been no net movement in cash US tsys in today's Asia-Pac session.
• “A record number of people left New Zealand in the year through March, reducing the net gain through immigration to the lowest in more than two years. Some 123,256 people departed the country in the period, including 70,000 New Zealand citizens.” (per BBG)
• Total card spending fell 0.2% m/m versus a revised -1.6% in March.
• The RBNZ balance sheet shrunk further in April to its smallest since 2021.
• Swap rates closed 9-15bps higher, with the 2s10s curve steeper.
• RBNZ-dated OIS pricing is flat to 3bps firmer across meetings today, leaving rates 2–14bps above levels seen prior to the Q1 CPI release on April 17. 25bps of easing is priced for May, with a cumulative 69bps by November 2025.
• Tomorrow, the local calendar will see Food Prices and a speech by Finance Minister Willis on Social Investment.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.