Aussie Bonds have moved higher, with...>

AUSSIE BONDS: Aussie Bonds have moved higher, with 3- & 10-Year Bond futures

breaching Monday's highs after a modest miss on the headline AU CPI metrics,

although the underlying CPI measures were largely in line with analyst estimates

(and subject to modest positive revisions in Y/Y terms). This is unlikely to

alter the RBA's steady hand approach. As a reminder the RBA's view is that

"inflation is low & is likely to remain so for some time," however, its central

forecast is "for CPI inflation to be a bit above 2.0% in 2018."

- The domestic 3-/10-Year yield spread has flattened back to ~56bp and the

AU/U.S. 10-Year yield differential has come under pressure as Aussie Bonds

outperform on the back of the CPI release, the spread last deals at -25.5bp.

- The bill strip last trades unchanged to 3 ticks higher, with the contracts

operating at/just off session highs.

- Looking at the IB strip, the May '19 contract is pricing in 5.0bp worth of

tightening, or a 20% chance of a 25bp hike by the end of May 2019.

- 3-Month BBSW fixed ~0.2bp lower today.