Cheaper With US Tsys, Ex-RBA Gov Macfarlane Warns Against Rate Cut Bets

ACGBs (YM -6.0 & XM -9.5) are sharply weaker after US tsys bear steepened, with yields finishing 9-16bps higher. While headline CPI beat by 0.1% and core printed in line, the services component, excluding housing and energy, rose 0.6% m/m. Moreover, the Cleveland Fed’s mean and trimmed mean measures and the Atlanta Fed’s sticky CPI measure all showed a pick-up for the second consecutive month.

• US STIR saw the odds of another 25bp hike back to around 40% from 30% yesterday.
• The curve gapped steeper immediately after the $20bn 30-year bond tailed 3.5bps, sparking fears that a lack of demand for tsys could see rates re-test recent highs, with the 10-year potentially making a run at 5%.
• Cash ACGBs are 6-9bps cheaper, with the AU-US 10-year yield differential 4bps lower at -23bps.
• Swap rates are 6-9bps higher.
• Bills strip pricing is -2 to -7, with mid-reds leading.
• RBA-dated OIS pricing is 1-5bps firmer across meetings, with Nov’24 leading.
• (AFR) “Former Reserve Bank governor Ian Macfarlane has told bond traders they will be wrong yet again in betting that the central bank will be cutting interest rates before the end of next year.” (See link)
• Today, the local calendar is empty.