A Little Cheaper After Thursday’s Notable Richening

Hawkish ECB speak provided the main catalyst for the cheapening observed in core global FI markets during the overnight session, allowing Aussie bond futures to peel back some of Thursday’s notable rally, which was largely facilitated by a soft domestic labour market (although the report, coupled with still elevated vacancy levels, does not change the picture of a still very tight labour situation in Australia, and shouldn’t be a game changer for the RBA, at least in isolation).

• That leaves YM -6.0 & XM -7.5, with both operating a little above their overnight base. Cash ACGB trade sees 5.5-7.5bp of cheapening, with the curve bear steepening.
• Bills run flat to -5 through the reds, while RBA dated OIS shows 19bp of tightening for next month’s meeting, alongside a terminal cash rate of a little over 3.50%, little changed from levels observed after yesterday’s labour market-inspired pull lower.
• Local headline flow has been fairly limited since the Sydney close.
• The domestic docket is empty on Friday, which will leave broader macro cues in the driving seat. Japanese CPI data and the latest round of monthly LPR fixings from the PBoC (no change expected, per the BBG survey, albeit with an outside chance of a cut to the 5-Year fixing to support the property market noted) headline the regional Asia-Pac docket into the weekend.