Yields Elevated as Markets Price Hikes

• Australia’s latest wage data showed a modest easing in labour cost pressures, with the Wage Price Index rising 3.3% y/y in Q1, down from 3.4% previously and broadly in line with expectations.

• On a quarterly basis, wages lifted 0.8%, unchanged from the prior quarter. The strongest increase came from electricity, gas, water and waste services, up 1.1% over the quarter.

• Housing finance lost a little momentum in March, with new loan approvals excluding refinancing easing for both owner occupiers and investors. Even so, activity remains well above last year’s levels, with investor lending still up 25% y/y and owner occupier lending up 14%.

• Domestic yields remain elevated, with 10-year futures sitting around 5.07% this morning. Bond markets continue to lean toward further tightening this year, with a 90% chance of a 25bp hike now priced in by August.

• In the US, producer prices came in above expectations, with headline PPI rising 1.4% m/m versus 0.5% forecast, lifting the annual pace to 6.0% y/y. Long-end USTs softened ahead of the latest 30-year auction, where demand remained weak with yields above 5% – the highest since 2007.