ACGBs Pare Initial Gains, Tweak To Westpac RBA Call Provokes Knee-Jerk Reaction

Aussie bonds trimmed their initial gains, as the broader core FI space came under pressure, while hawkish RBA expectations sharpened at the margin.

• U.S. e-minis operated in the green, while Asia-Pac equity benchmarks outside of China and Japan firmed. The combination of the BoC's unexpected shift to a slower pace of rate hikes, weaker-than-forecast U.S. data outturns from earlier this week and underwhelming earnings reports from some U.S. tech giants lent credence to the narrative suggesting that the Fed could soon pivot to less aggressive tightening.
• ACGBs briefly ticked lower in a knee-jerk reaction to Westpac's updated RBA call. The bank now sees a 50bp cash rate target hike next week and a terminal rate of 3.85%. The tweak to his forecast came after a number of sell-side desks lifted their peak rate estimates in reaction to expectation-beating CPI report Wednesday, though the dominant view remains that we will see a 25bp move next week.
• Overhang impetus helped push Aussie bond futures to session highs in morning trade, before they slowly unwound gains; YM last sits +7.0 & XM +5.0. Bills run unch. to +11 ticks through the reds. Cash ACGB curve runs steeper and sits lower, albeit off early session lows.