Bull Steepening Facilitated By U.S. Tsy Dynamic

The U.S. Tsy move drove bull steepening of the Aussie bond futures curve in post-Sydney dealing, although like U.S. Tsys, Aussie bond futures pulled back from best levels of overnight trade, leaving YM +9.0 & XM 6.5 in early Sydney dealing, incrementally below late overnight levels.

• Labour market data and the latest Melbourne Institute inflation expectations readings headline the domestic docket on Thursday. The former shouldn’t be a gamechanger, with forward looking indicators pointing to a ever-tightening labour market that continues to outstrip RBA expectations (Q1 CPI & WPI data will be more integral to the timing of the Bank’s cash rate lift off and trajectory of tightening observed early in the cycle), while the latter will give further insight into the “inflation psychology” that the RBA is closely monitoring.
• We should also see the release of the AOFM’s weekly issuance slate, with Sydney participants set to enjoy a 4-day weekend.