Cheaper, Light Calendar Ahead Of US CPI Tonight

ACGBs (YM -4.0 & XM -2.0) are weaker after US tsys twist flattened with yields 6bp higher to 4bp lower. Light volumes with no data or Fed speak to report. Traders were generally on the sidelines ahead of Thursday’s US CPI release. Nervousness over the potential for stronger-than-expected data that could keep the FOMC on a tightening path may have encouraged some position squaring at the short end. See the MNI CPI preview here.

• US tsys see-sawed mildly higher after the $38bn 10-year note auction tailed slightly: 3.999% high yield vs. 3.997% WI; 2.56x bid-to-cover vs. 2.53x prior. Meanwhile, some modest corporate debt generated some two-way rate lock hedging.
• Cash ACGBs opened 2-3bp cheaper with the AU-US 10-year yield differential 2bp wider at +1bp.
• The 3s10s swaps curve bear flattens, with rates 1-2bp higher.
• The bills strip is slightly cheaper, with pricing -1 to -3.
• RBA-dated OIS pricing is little changed, with terminal rate expectations at 4.22%.
• Today the local calendar sees Consumer Inflation Expectations data. Tomorrow, RBA Governor Lowe will make his final appearance before the House of Representatives standing committee on economics.