A Big Day For ACGBs (And The RBA)

The impetus observed in U.S. Tsys allowed Aussie bond futures to more than reverse their early gains during post-Sydney dealing, leaving YM -0.5 & XM at +1.5 shortly after the re-open, a touch above late overnight session levels.

• Q2 CPI dominates the local docket on Wednesday, with median expectations looking for a headline reading of +6.3% Y/Y, which would represent a fresh multi-decade high. Meanwhile, the RBA’s preferred trimmed mean metric is expected to accelerate to +4.7% Y/Y, which would represent the highest reading observed since ’08. Note that the IB strip currently prices in ~58bp of tightening for the RBA’s August meeting, with a notable upside surprise for the headline and/or trimmed mean metrics having the potential to ignite increased speculation re: the prospect of a 75bp step come the end of next week’s monetary policy decision.
• A reminder that the RBA has already flagged that it expects headline inflation to hit 7% by year-end, with Governor Lowe pointing to a period of steady rate increases in recent communique.