Back The Other Way

Aussie bonds unwound the post-RBA move higher and more in overnight trading, leaving YM -15.5 & XM -13.0 at the Sydney re-open, roughly in line with late overnight levels. Meanwhile, Bills sit 5-17bp cheaper through the reds.

• A reminder that late pull higher in Sydney hours came as the RBA delivered the widely expected and largely priced 50bp rate hike, while it formally introduced some of its well-trodden verses into the post-meeting statement, which left markets with a dovish takeaway to trade off of (see our full review of the event here).
• Subsequent articles from some of the more notable RBA watchers in the local press have alluded to the likelihood of deeper discussions surrounding slowing the pace of tightening over the coming months (see here & here).
• Still, it was the international environment that drove the overnight cheapening after bonds finished the Sydney session around best levels, with hawkish Fedspeak and a lack of outright meaningful Chinese escalation surrounding U.S. House Speaker Pelosi’s visit to Taiwan allowing global FI markets to cheapen on Tuesday.
• Looking ahead, Q2 retail sales volumes data, the final S&P services PMI print & A$800mn of ACGB Nov-32 supply provide the domestic highlights on Wednesday. Elsewhere, there may be some trans-Tasman impetus from the latest NZ labour market report, which is due to be released shortly. The situation surrounding Taiwan will also be worth watching, with Chinese military drills due to be conducted over the coming days and Pelosi set to meet with the President of Taiwan.