Bear Steepening Early On

ACGBs run cheaper to start the day, with YM -3.0 & XM -5.0, after the mood music from global core FI markets shaped post-Sydney dealing. Note that futures have cheapened a touch in early Sydney trade, perhaps reflecting some pre-BoJ set up after the rally from lows into the overnight close. YM has made a shallow showing through its overnight base, while XM operates clear of its post-Sydney lows. Cash ACGBs sit 2-5bp cheaper, as the wider curve bear steepens.

• We haven’t seen much in the way of meaningful domestic news flow.
• Bills run 1-4bp cheaper through the reds, steepening at the margin.
• RBA dated OIS continues to show ~20bp of tightening for next month’s meeting, while terminal cash rate pricing has pushed a little above 3.75%, firming a touch.
• The local docket is empty today.
• Regional Asia-Pac focus will fall on the latest BoJ decision, with the market primed for another hawkish tweak to the Bank’s YCC settings, even though nearly all surveyed economists look for the bank to leave its policy settings unchanged (with varying degrees of conviction).