Cheaper In Futures Roll-Impacted Dealings, US Tsys Cheaper On Friday After Payrolls Data

In future roll-impacted dealings, ACGBs (YM -6.2 & XM -5.2) are cheaper after November’s Non-Farm Payrolls beat expectations across almost all metrics on Friday.

• Average hourly earnings growth (+0.4% m/m vs. +0.3% est. & +0.2% prior) was also hotter than expected, which could add to the Federal Reserve's resolve to keep rates higher for longer to cool the labour market and rein in inflation.
• US tsy yields gapped higher on the data but quickly scaled back as the market digested the down-revisions to prior and unrounded releases. The 2-year rate was 13bps cheaper at 4.72%, while the 10-year yield increased 8bps to 4.23%.
• The long-term cost of the federal government’s debt interest bill has blown out by A$80bn since the May budget, overtaking the National Disability Insurance Scheme as the Commonwealth’s fastest-growing expense. (See AFR link)
• Cash ACGBs are 5-6bps cheaper, with the AU-US 10-year yield differential 3bps tighter at +12bps.
• Swap rates are 4-5bps higher, with EFPs 1bps narrower.
• The bills strip pricing -3 to -7, with late reds leading.
• RBA-dated OIS pricing is 1-6bps firmer across meetings, late-2024 leading.
• There are no data or events in Australia today but on Tuesday RBA Governor Bullocks speaks and employment data prints on Thursday.