Cheaper But Well Off Lows After Building Apps Miss & NZGB Rally, FOMC Decision Due

ACGBs (YM -3.0 & XM -3.0) remain cheaper but are well above the Sydney session’s worst levels. This push away from session cheaps can be attributed to weaker-than-expected building approvals data and spillover from NZGB’s post-employment data rally. NZ Q3 employment contracted 0.2% q/q after rising 1%, the first drop since Q2'22. Nevertheless, wages looked stubborn, with Q3 labour costs rising 1.1% q/q and 4.3% y/y.

• The intraday rally in ACGBs was also assisted by US tsy dealings in the Asia-Pac session. Cash US tsys are 1-3bp richer, ahead of the FOMC decision later today.
• The cash ACGB 10-year yield is 4.96%, 3bps higher on the day, after earlier touching 5.0% for the first time since 2011.
• Swap rates are 1-2bps higher.
• The bills strip is flat to -2.
• RBA-dated OIS pricing is 2bps firmer (Feb’24) to 1bp softer (Jun’24) across meetings, with terminal rate expectations at 4.54% (+47bps by Jun’24). The expected terminal rate hit 4.58% earlier in the session.
• Tomorrow, the local calendar will see Trade Balance and Home Loan data.
• AFR reports that the IMF, in a staff report, said Australia needs to tighten monetary policy further as part of stepped-up efforts to rein in inflation that include governments slowing the pace of public investment. (See link)