ACGBs Sink In Reaction To Evidence Of Building Inflationary Pressure

The release of above-forecast inflation data out of Australia briefly turned attention away from familiar global risks. Both headline CPI and the "trimmed mean" gauge of core CPI topped forecasts, with the latter overshooting the mid-point of the RBA's target range for the first time since 2014. The data resulted in hawkish RBA repricing, market pricing suggests that the first rate hike could come as soon as in May.

• The CPI report knocked ACGBs on their heads across all maturities. Yields have jumped in the immediate wake of the release, with the 3-Year yield climbing to its highest point since Apr 2019, amid speculation that the RBA could ditch their QE programme next week. Cash ACGBs remain in negative territory, with yields last seen 2.3-9.0bp higher across a flattened curve. Aussie bonds also retreated, YM last -7.0 & XM -3.0. Bills trade 4-7 ticks lower through the reds.
• T-Notes have inched higher in early trade and last operate -0-08+ at 128-08, stabilising after a sharp pullback in NY hours Monday. Eurodollar futures trade 1.0-5.5 ticks lower through the reds. Cash Tsy curve runs slightly flatter, with yields last seen +0.8bp to -0.9bp. Conf. Board Consumer Confidence & 5-Year Tsy auction will take focus in the U.S. today, as participants await Wednesday's monetary policy decision from U.S. FOMC.
• JGB futures slipped in early trade, after a sharp sell-off in U.S. Tsys in the NY session. JBH2 last changes hands at 150.96, 3 ticks above previous settlement. Cash JGB curve runs a tad steeper, as the super-long end leads losses ahead of today's 40-Year JGB auction. The reaction to comments from BoJ Gov Kuroda & PM Kishida was muted at best.