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AUSSIE BONDS: Richer, MYEFO Signals Improved Fiscal Position, Jobs Report Tomorrow

AUSSIE BONDS

In futures roll-impacted dealings, ACGBs (YM +2.2 & XM +5.5) are stronger but slightly off Sydney session best levels. The key domestic event today was the publication of the government’s Mid-Year Economic and Fiscal Outlook (MYEFO).

  • As expected, the budget and debt ratio projections improved compared with May’s budget. A surplus is not yet forecast for this financial year, with a small deficit of $1.1bn projected (a $12.8bn improvement). It is however a negligible share of the economy. The MYEFO shouldn’t change the RBA’s view that fiscal policy is currently not inflationary.
  • Elsewhere, CBA’s household spending index rose 4.1% y/y in November versus a revised +2.4% in October. Household spending rose 1.8% m/m versus a revised -0.6% in October.
  • US tsys are dealing ~1bp richer in the Asia-Pac session ahead of tonight’s FOMC rate decision.
  • Cash ACGBs are 2-6bps richer, with the AU-US 10-year yield differential 4bps tighter at +8bps.
  • Swap rates are 2-4bps lower, with EFPs slightly wider.
  • The bills strip is flat to +1 across contracts.
  • RBA-dated OIS pricing is slightly softer across meetings.
  • Tomorrow, the local calendar sees the November Employment Report. Bloomberg consensus is expecting a gain of 11.5k jobs, with an uptick in the unemployment rate to 3.8% from 3.7%.

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