AUSSIE BONDS: Post-RBA Rally Pared After CPI Data

ACGBs (YM -4.0 & XM -3.0) are cheaper and at/near Sydney session lows following the release of CPI data for August. 

• Headline CPI eased in August to 2.7% y/y from 3.5%, in line with expectations, though the RBA noted in its September statement that temporary factors are influencing the current figures.
• The moderation in the underlying measure should offer some reassurance to the RBA, although the decline in services inflation was modest, and it remains elevated. As Governor Bullock emphasized yesterday, services inflation remains the “crux of the matter”.
• The RBA continues to prioritise the more comprehensive quarterly CPI data, with the Q3 report set for release on October 30.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-steepener.
• Cash ACGBs are 3bps cheaper, with the AU-US 10-year yield differential +18bps. ACGBs remain 4-6bps richer than yesterday’s pre-RBA levels.
• Swap rates are 2-3bps higher.
• The bills strip has bear-steepened, with pricing -2 to -5.
• RBA-dated OIS pricing is firmer after the data but remains 5-9bps softer than pre-RBA levels yesterday for 2025 meetings. A cumulative 16bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Job Vacancies data and the release of the RBA's Financial Stability Review.