AUSSIE BONDS: Little Changed After A Subdued Ahead Of Long Weekend

ACGBs (YM flat & XM -2.5) are slightly weaker but Sydney session highs on a data-light session.

• Today we will see the Federal Budget presented around 1930 AEDT. A Federal Election is likely to be called soon after. The Budget is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Cash ACGBs are flat to 2bps cheaper with the AU-US 10-year yield differential at +9bps.
• Swap rates are 1-2bps higher.
• The bills strip is -1 to -2 across contracts.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in April is given a 3% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar will see February CPI data.  It is the middle month of the quarter and so will include updates to services components. Headline is forecast to be steady at around 2.5%. The trimmed mean printed at 2.8% in January.
• The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond tomorrow and A$700mn of the 1.25% 21 May 2032 bond on Friday.

Oil is little changed during today’s APAC session as the market range trades given the highly uncertain outlook but holds onto Monday’s gains. While OPEC and the US plan to increase output, tighter sanctions on Iran and Venezuela could reduce it. Peace in Ukraine looks a long way off and with it an easing in restrictions on Russia. The market is concerned that increased protectionism will weigh on global demand but there is now talk that reciprocal tariffs will be targeted rather than broadly applied. 

• WTI is steady at $69.08/bbl after falling to $69.02, while Brent is around $73.00/bbl following a low of $72.92. The USD index has also been range trading and is down slightly.
• US President Trump signed an order to charge importers of Venezuelan oil and gas a 25% “secondary” tariff from April 2, whether it comes indirectly or directly. This is likely to hit China and India significantly. The order gives Secretary of State Rubio discretion though. It accounts for just under 1% of global output, according to Bloomberg.
• The US itself buys Venezuelan heavy crude used in Gulf Coast refineries. The US’ Chevron has had its licence to produce there extended to give it more time to wind down its operations. 
• Last week the market was reassured by another US product stock drawdown even though crude rose again, as it signalled solid demand. Today US industry-based inventory data is released.
• Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released. 

In today's Asia-Pac session, TYM5 is 110-19, +0-01+ from closing levels.

• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Today's US calendar will see Philadelphia Fed Non-Manufacturing, Richmond Fed Mfg, House Prices, New Home Sales and Building Permits data, as well as, Fedspeak from Kugler and Williams.
• Yesterday, concession building ahead of the $183bn in auctions this week added to the selloff, as did the somewhat hawkish comments from the Fed's Bostic.
• Atlanta Fed Pres Bostic (non-2025 FOMC voter) said in a Bloomberg interview that he has reduced his 2025 rate cut expectations to 1 in March's economic projections versus 2 previously, "because I think we will see inflation be very bumpy", and delayed inflation progress warranted pushing back the path to neutral rates.