Back From Best Levels On Wider Bid For Risk

ACGBs pulled back from best levels as the Sydney day wore on, with the post-U.S. CPI bid waning as risk-positive flows came to the fore.

• China’s move to outline its “optimised” COVID controls saw a wind back of international flight restrictions and reduced post-travel quarantine periods for travellers, as had been flagged in recent news wire source reports.
• Still, this failed to impact Aussie bond futures, with the news crossing around the Sydney close. That left YM +9.0 and XM +6.5 come the close. The wider ACGB curve bull steepened, but the pullback from best levels saw the curve work away from session steeps, leaving the major benchmarks 3-9bp richer late in the day.
• Bills were 5-9bp richer through the reds at the bell, comfortably off of best levels, bull flattening. RBA dated OIS was softer on the day, in lieu of yesterday’s U.S. CPI print, with ~19bp of tightening now priced for next month’s RBA meeting & a terminal cash rate of ~3.75% observed on the strip.
• Next week’s AOFM issuance slate is somewhat vanilla, while semi-issuance saw NSWTC mandate banks for a benchmark round of Feb-35 supply, which would have applied some marginal pressure.
• Next week’s domestic docket is headline by the minutes from the latest RBA meeting, the monthly labour market report and quarterly WPI data.