AUSSIE BONDS: Richer After A Solid Session For US Tsys, RBA Minutes Due
Apr-15 00:32
ACGBs (YM +1.0 & XM +3.0) are slightly stronger after US tsys opened in today’s Asia-Pac session little changed.
- Yesterday, risk stabilised, and US yields benefited as money was put back to work.
- The US 10-year yield is dealing in the Asia-Pac session around 4.3815%, after closing yesterday at 4.3739%.
- The US market has been forced to reduce the number of cuts it was expecting as the Fed has been consistent in saying it was worried about inflation due to the President's policies. Bostic spoke this morning: "Right now range of possible outcomes has multiplied. Inflation is still much higher than target. Not in a position to boldly move in any direction, need more clarity." (via RTRS/BBG)
- Today, the local calendar will see the release of the RBA Minutes for the April Meeting.
- Cash ACGBs are 1-3bps richer with the AU-US 10-year yield differential at -1bp.
- Swap rates are also lower with EFPs little changed.
- The bills strip has bull-flattened, with pricing flat to +4.
- RBA-dated OIS pricing is flat to 3bps softer across meetings today. A 50bp rate cut in May is given a 40% probability, with a cumulative 120bps of easing priced by year-end.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
