ACGBs Take Beating As Jobs Data Fuels RBA Tightening Bets, Short-End Leads Losses

The dust is settling after Wednesday's monetary policy decision from the Fed, who accelerated asset purchase taper and projected three rate hikes next year. Focus turned to comments from RBA Gov Lowe, who continued to push back against market pricing of a cash rate hike next year, as "we are still a fair way" from the point where "inflation is sustainably in the +2.0%-3.0% Y/Y range." Australia's jobs data overshadowed those comments, as all key metrics smashed expectations, indicating a further tightening in the labour market.

• T-Notes extended losses as trading reopened in Tokyo, but have already moved away from their session low of 130-11+. The contract trades unch. at 130-15 as we type. Cash Tsy curve has flattened, with yields last seen +1.4bp to -0.1bp. Eurodollar futures trade 0.25-1.5 tick through the reds. Local data highlights on Thursday include industrial output, housing starts, building permits & weekly jobless claims.
• JGB futures slipped in early trade and finished the morning session at 152.02, 5 ticks shy of last settlement. Cash JGB yield curve has flattened a tad. Japan's trade deficit widened in November, albeit an acceleration in exports growth was interpreted a positive sign re: external demand. Participants eye the BoJ's monetary policy decision, due Friday.
• Cash ACGBs plunged following the release of Australian labour market report, extending modest initial losses driven by post-FOMC market impetus. Bear flattening is evident, as yields trade 1.2-10.7bp higher, with 3-year yield posting the largest jump. Aussie bond futures took a beating, YM last -11.1 & XM -4.0. Bills trade 3-15 ticks through the reds. Worth noting that Australia's year-ahead consumer inflation expectations surged to the highest level since Aug 2012, while the Treasury said they expect a further decline in unemployment over 2022 & 2023, which support the case for swifter policy tightening from the RBA.