Cheaper Ahead Of Jobs Data

ACGBs (YM -6.0 & XM -4.5) are cheaper ahead of today’s all-important employment report. US tsys drifted back to the upper part of the session range by the end with short-end rates underperforming. US tsys finished flat to 6bp richer with the 2s10s curve inversion exceeding 100bp for the first time since July 6.

• US tsys had traded firmer early after lower-than-expected UK CPI data (0.1% MoM vs. 0.4% est) but pared gains by mid-session, likely due to rate locks on expected corporate issuance and/or pre-auction short sets ahead of $12B of 20-year supply. The auction drew strong demand despite a rally into the bidding deadline.
• Cash ACGBs opened 4-5bp cheaper with the AU-US 10-year yield differential +2bp at +16bp.
• Swap rates are 4-6bp higher.
• The bills strip bear steepens with pricing -3 to -7.
• RBA dated OIS pricing is flat to 4bp firmer across meetings.
• Today the calendar sees the June Employment report. The market is expecting a gain of 15k jobs after May’s very sizeable +75.9k. The unemployment rate is likely to remain at 3.6% (see MNI June Employment Expected To Post Modest Rise). Also released today is the NAB Business Confidence Report for Q2.