ACGBs Decline With Offshore Cross-Currents In Operation & Inflation Worries Rife

Cheapening impetus from the NY session has spilled over into ACGBs in early Sydney trade. Yields last trade 0.5-4.3bp higher across the steepened curve, with 10-Year yield lodging fresh multi-year highs. Futures contracts have also shown some marginal weakness, with YM now little changed & XM -3.9. Bills run up to 5 ticks higher through the reds.

• Trans-Tasman contagion may have amplified pressure to ACGBs after the RBNZ released a statement detailing planned sales of government bonds acquired under the LSAP programme. The Reserve Bank is preparing to begin shedding its bond holdings from next month and complete the process in mid-2027. The yield on 10-Year NZGB jumped to levels last seen in 2015 as New Zealand government bonds faltered across the curve.
• Domestic inflation debate is getting some traction as Australian Secretary to the Treasury Kennedy (he sits on the RBA's policy board) suggested inflation is likely to breach 6%, could run "well above" that level and remain elevated through the year-end. The most recent RBA forecast table had headline inflation topping out at 6%. But announcing a larger-than-expected 50bp rate hike earlier this week, Governor Lowe conceded that "inflation is likely to be higher than was expected a month ago."
• Separately, the WSJ interviewed RBA policymaker Ian Harper, who said the central bank wants to return the cash rate target to neutral levels at speed. Mimicking language deployed by the RBNZ, Harper invoked the "stitch in time" logic to explain the Board's thinking. He noted that the RBA needed to show that it was "far from being asleep at the wheel" and maintain inflation-fighting credibility.
• The local economic docket is virtually empty during the remainder of this week.