Above-Forecast CPI Report Applies Pressure To ACGB Space

Cash ACGBs took a nosedive on the release of Australian Q3 CPI data, which came in stronger than expected. The RBA-sensitive 3-Year yield has reversed earlier losses, soaring into positive territory, and last sits at 3.570%. The curve still runs flatter, with yields last +1.5bp to -9.0bp, with 3-Year/10-Year spread extending losses.

• Aussie bond futures have retreated as inflation data fanned hawkish RBA expectations, with YM last +1.0 & XM +9.5, with YMXM printing multi-week lows. Bills run 2-11 ticks lower through the reds.
• Headline CPI accelerated to +1.8% Q/Q in the third quarter, beating consensus forecast of +1.6%. Trimmed mean CPI also rose faster than forecast, printing at +1.8% Y/Y, above the +1.5% median estimate. The annual increase in headline CPI was +7.3%, the fastest pace in 32 years.
• The data seals the case for a 25bp hike to the cash rate target next week, with such move now fully priced by meeting-dated swaps, after the implied amount of tightening blipped higher in reaction to the inflation figures.