Closing Around Early Sydney Levels After Two-Way Trade

Aussie bonds gravitated back towards early Sydney levels after the pre-data bid waned in the wake of a strong labour market report and as U.S. Tsys softened, although a recovery from Sydney cheaps was seen into the close as U.S. Tsys ticked away from session lows.

• YM finished +7.0, with XM +11.0, while cash ACGBS were 6-11bp richer across the curve, with the 10- to 20-Year zone outperforming.
• The labour market continues to perform strongly, while wage growth has accelerated in recent times. Still, we doubt that this week’s labour market and wage data will trigger a move back to 50bp hikes for the RBA, given the proximity to the recent downshift to 25bp steps and the Bank’s clear focus on the lagged impact of the already deployed tightening, as well as the risks (both domestic & global) that are swirling around the Australian economy.
• Bills finished 1-15bp richer, with RBA dated OIS printing just over 20bp of tightening for next month’s RBA meeting and a terminal cash rate of just under 3.80%, with the latter softening a touch early in Sydney dealing.
• Looking ahead, A$700mn of ACGB Nov-29 supply and the release of the weekly AOFM issuance slate headline the domestic docket on Friday.