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XM outperformed its U.S. counterpart overnight as the U.S. cash Tsy curve twist steepened on the day, although a run away from session cheaps in the U.S. Tsy space was a driving force behind the XM bid. The domestic curve was subjected to some light bull flattening pressure overnight, leaving YM +1.5 and XM +3.0.
- The local economic slate is pretty bare ahead of Wednesday's Q3 CPI print. Re: Q3 CPI, the headline Y/Y print is expected to slow to 3.1% from 3.8%, per the BBG survey, while the trimmed mean measure is seen at 1.8% Y/Y vs. the 1.6% seen in Q2, still below the key 2% level.
- An upside beat in the data would likely generate pressure at the front end of the ACGB curve and therefore in YM futures, with the market keen to test the RBA's resolve in that area of monetary policy. A reminder that last week saw the RBA initially hike repo rate costs for ACGB Apr-24 (as well as repo costs for a slightly shorter dated bond), before it stepped in to buy A$1.0bn of the line, defending its YCT mechanism for the first time since February as the initial step wasn't successful owing to a lack of a meaningful short base in the line (the bond was threatening to break 0.18% in yield terms, vs. the RBA's target of 0.10%).
- Note that the last week has seen YM open interest fall from ~777K to ~724K, which looks to represent a reduction in longs given price action. A similar picture is portrayed over a monthly horizon, with YM OI falling from ~800K over that timeframe (a near 10% reduction).