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AUSSIE BONDS: Cheaper But Off Worst Levels, MI Infl Exps Highest Since April

AUSSIE BONDS
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ACGBs (YM -3.0 & XM -2.5) are weaker but well off Sydney session cheaps.

  • Melbourne Institute's February inflation expectations jumped 0.6pp to 4.6%, the highest since April and 0.1pp above February last year. It was the largest monthly rise since June 2022. The pickup occurred despite the much-publicised moderation in Q4 CPI inflation but petrol prices rose 0.7% in the first week of February and some state-based electricity relief expired in Q4.
  • Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s aggressive post-CPI sell-off. Fed chair Powell cautioned against getting "excited" about yesterday's CPI report ahead of PPI (today 0830 ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.”
  • “Sticky US inflation just made the RBA’s cut call harder.” (see link)
  • Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -12bps.
  • Swap rates are 3-4bps higher.
  • The bills strip has bear-steepened, with pricing -2 to -4.
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ACGBs (YM -3.0 & XM -2.5) are weaker but well off Sydney session cheaps.

  • Melbourne Institute's February inflation expectations jumped 0.6pp to 4.6%, the highest since April and 0.1pp above February last year. It was the largest monthly rise since June 2022. The pickup occurred despite the much-publicised moderation in Q4 CPI inflation but petrol prices rose 0.7% in the first week of February and some state-based electricity relief expired in Q4.
  • Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s aggressive post-CPI sell-off. Fed chair Powell cautioned against getting "excited" about yesterday's CPI report ahead of PPI (today 0830 ET), reminding that the latter report carries potentially different implications for the Fed's preferred PCE gauge: "The CPI reading was above almost every forecast.”
  • “Sticky US inflation just made the RBA’s cut call harder.” (see link)
  • Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -12bps.
  • Swap rates are 3-4bps higher.
  • The bills strip has bear-steepened, with pricing -2 to -4.