Bond futures trade just off of worst...>

AUSSIE BONDS: Bond futures trade just off of worst levels after the move lower

in the wake of the domestic CPI release pushed YM & XM away from YtD highs.

Today's domestic CPI data will re-affirm the RBA's view that the next move in

the cash rate will likely be higher, and that there is no need for adjustments

in the Bank's policy settings in the near term. The latest round of headline

domestic CPI data topped exp., although remains shy of the lower end of the

RBA's target band of 2.0-3.0%. Underlying inflation metrics were inline with the

RBA's Q4 assumption (from the most recent SoMP). This comes at a time when the

market remains focused on the prospect of rate cuts (BBG interpolated OIS WIRP

model points to a ~35% chance of MonPol loosening this year, as a modest degree

of rate cut chances were priced out in lieu of the CPI print). 

- YM -3.5 ticks and XM -1.0 tick. YM/XM runs flatter to 50.0 as a result, with

the cash equivalent at 48.9bp. AU/U.S. 10-Year yield spread trades at -47.5bp.

- Bills last trade 2-4 ticks softer through the reds. IB activity is running at

a healthy rate, contracts from March out trade 1.5 to 3.5 ticks lower on the

day.