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Cheaper, Hawkish FOMC Minutes, Employment Data Due


ACGBs (YM -1.0 & XM -2.0) are cheaper ahead of today’s July Employment Report. US tsys finished cheaper after the FOMC minutes for July revealed that a majority of participants maintain a perspective of substantial upward risks to inflation, potentially necessitating additional measures to tighten monetary policy. Furthermore, the minutes highlighted that forthcoming data in the following months would offer insights into the ongoing trajectory of the disinflation process.

  • There was little change to market pricing for the Fed funds track with 10bps of additional hikes priced over the next two meetings.
  • The long end underperformed in a bear steepener, with the 10-year rate rising 4bp to 4.25%, still hampered by strong resistance at 4.26%. The 2-year was up 1bp to 4.97%, also stopped by the 5% level.
  • Cash ACGBs opened flat to 2bp cheaper, with the AU-US 10-year yield differential 5bp narrower at -2bp.
  • Swap rates are flat to 2bp higher, with the 3s10s curve steeper.
  • The bill strip pricing is little changed.
  • RBA-dated OIS pricing is unchanged across meetings.
  • Today the local calendar sees the July Employment Report. The market expects +15k after +32.6k in June. The unemployment rate is forecast to rise to 3.6% from 3.5%.

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