At Session Cheaps After Retail Sales Beat, 70% Chance Of A Nov Hike

ACGBs (YM -5.0 & XM -7.5) are sitting weaker, at or near the Sydney session’s worst levels, after Retail Sales for September printed much stronger than expected. That said, the strength was due to a number of special factors (e.g. warmer spring boosting clothing) so is unlikely to be repeated in October. The Q3 average rose a 3-month annualised rate of 3.4% up from 1.7% in Q2. Sales were positive in every month in Q3 signalling resilience in consumption.

• Cash ACGBs are 5-7bps cheaper on the day, with the AU-US 10-year yield differential 6bps higher at +1bp. The last time the differential was in positive territory was in mid-August.
• Swap rates are 5-7bps higher on the day, with EFPs little changed.
• The bills strip is cheaper, with pricing -3 to -8, late whites/early reds the weakest.
• RBA-dated OIS pricing is 1-8bps firmer across meetings, with late’24 leading. The market is attaching a 71% chance of a 25bp hike from the RBA at next week’s policy meeting. Terminal rate expectations have jumped to 4.51% (+44bps), the highest level since mid-July.
• Tomorrow, the local calendar sees Private Sector Credit, CoreLogic House Prices and Judo Bank PMIs data.