AUSSIE BONDS: Cheaper After CPI Monthly But Muted Reaction

ACGBs (YM +1.0& XM +2.0) are slightly stronger but slightly cheaper after October’s CPI data. There was an initial spike richer, but that was quickly unwound.

• October CPI printed at 2.1%, lower than expected but in line with September. However, the trimmed mean increased to 3.5% from 3.2%, the highest since July. The first month of the quarter has limited updates for services components.
• The RBA is currently focusing on underlying and services measures due to the temporary decline in headline inflation from government electricity rebates. It also prefers the quarterly CPI data with Q4 out on January 29.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session.
• Cash ACGBs are 1-2bp richer with the AU-US 10-year yield differential at +13bps.
• Swap rates are flat to 2bps lower.
• Bills strip pricing is flat to +2, with a flattening bias.
• RBA-dated OIS pricing is flat to 3bps softer across meetings, with the mid-2025 leading the move.
• A 25bp rate cut is not fully priced until July. It was May before the data.  
• Tomorrow, the local calendar will see Q3 Private Capital Expenditure data and a speech by RBA Governor Bullock at the CEDA Conference aftermarket.