Cheaper With US Tsys, Focus Turns To NFP Data Tonight, AOFM Update Due

ACGBs (YM -6.0 & XM -7.5) are cheaper after US tsys continued to weaken in the new year. A rethink of aggressive rate hike bets, stronger data, profit taking, and supply have all combined to cheapen US tsys in the first week of trading in 2024.

• US tsys opened weaker overnight then extended lows after higher-than-expected ADP Employment Change data (164k vs 125k est) and lower-than-expected Initial Jobless Claims (202k vs. 216k est). The market now awaits Non-Farm Payrolls data later today.
• The S&P 500 was -0.3% lower, posting a 4th straight decline. AFR reported that JPMorgan strategists said short-term sell signals have been triggered. “The S&P 500 Index rejection of resistance levels surrounding 4800 triggered our systematic momentum divergence sell signals. A break below 4694 Dec pattern support would confirm a trend reversal in our view and seek next support at the 4607 summer peak and then 4500-4537 cluster of levels.”
• Cash ACGBs are 5-7bps cheaper, with the AU-US 10-year yield differential unchanged at +12bps.
• Swap rates are 6-7bps higher, with the 3s10s curve steeper.
• The bills strip is cheaper, with pricing -2 to -7.
• RBA-dated OIS pricing is 1-4bps firmer for meetings beyond March.
• Today, the local calendar is empty, although the AOFM is scheduled to provide details on issuance plans for the second half of 2023-24 today.