Cheaper With US Tsys, RBA Minutes Due

ACGBs (YM -5.0 & XM -5.5) are weaker after US tsys cheapened as Fed officials cautioned the markets about premature speculation over rate cuts. But the losses were small. Yields finished flat to 4bps higher, with the US 2/10 steeper. The S&P 500 rose 0.45% to 4740, edging closer to the all-time peak of 4796.

• Fed Mester told the FT that the market had gotten “a little bit ahead” by pencilling in early interest rate cuts, “the next phase is … about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%”.
• (Wall Street Journal) -- A Federal Reserve official (SF Fed Mary Daly) said it is appropriate for the central bank to begin looking ahead to lowering interest rates in 2024 because of how inflation has improved this year. (See BBG link)
• Cash ACGBs are 4-5bps cheaper, with the AU-US 10-year yield differential 2bps wider at +18bps.
• Swap rates are 3bps higher, with EFPs little changed.
• The bills strip has bear-steepened, with pricing -2 to -5.
• RBA-dated OIS pricing is 1-4bps firmer across meetings. 56bps of easing is priced by Dec’24.
• Today, the local calendar sees RBA Minutes for the December Meeting.