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Cheaper As US Tsys Pare November’s Gains Into Month-End


ACGBs (YM -5.0 & XM -6.5) are cheaper after US tsys pared November’s rally into month end. Yields finished 4-7bps higher, with the 10-year leading. The US tsy 10-year yield rose 7bps to 4.33% but is still down 65bps from the cycle high of 5.01%.

  • The FOMC has reached its terminal rate, according to Fed funds futures and rate cuts are the next action. While a cut is still fully priced for May, Fedspeak overnight pushed back against the market's dovish policy outlook. Fed Daly said that she is not thinking about rate cuts, and it is too early to call an end to hikes. Fed Williams noted that monetary conditions are restrictive but should remain so for some time to bring inflation back to 2%.
  • Judo Bank Australia Manufacturing PMI printed 47.4 In November versus 48.2 In October.
  • Australia’s home-price growth slowed in November as a resumption of interest-rate increases and deteriorating affordability pushed buyers to the sidelines, suggesting a gloomier outlook for the property market. (See Bloomberg link)
  • Cash ACGBs are 5-6bps cheaper, with the AU-US 10-year yield differential 5bps wider at +15bps.
  • Swap rates are 4-5bps higher, with EFPs slightly tighter.
  • The bills strip bear-steepens, with pricing flat to -7.
  • RBA-dated OIS pricing is flat to 3bps softer across meetings.

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