Bear Flattening Ahead Of Q3 CPI Data

ACGBs (YM -4.0 & XM -0.5) are weaker, led by the short end, after US tsys finished with a twist-flattening. Cash US tsys finished 6bps cheaper to 6bps richer across the major benchmarks, pivoting on 7s.

• US tsys ticked away from a European PMI-induced strengthening on spillover from China headlines noting an extra 1TN in Yuan sovereign bond issuance. Losses then extended, particularly for the short end, following stronger-than-expected US flash PMI data.
• Cash ACGBs are flat to 5bps cheaper, with the AU-US 10-year yield differential 3bps higher at -13bps.
• Swap rates are flat to 5bps higher, with the 3s10s curve flatter and EFPs little changed.
• Bills strip pricing is -3 to -5, with late whites/early reds the weakest.
• RBA-dated OIS pricing is 2-5bps firmer for ’24 meetings, with Sep-Dec’24 leading.
• AFR reports that Westpac economics – led by ex-RBA Luci Ellis – expects the central bank to keep the official cash rate steady at 4.1 per cent until June next year. (see link)
• Today, the local calendar sees Q3 CPI data. Headline is forecast to ease to 5.3% y/y from 6% in Q2, helped by base effects. Q3 trimmed mean is also expected to be lower at 5%. See MNI Q3 CPI Should Moderate Further But Quarterly Rise Still High.