Curve Steeper, U.S. CPI Eyed

Aussie bonds came under some steepening pressure on Thursday, leaving YM +0.5 & XM -4.5 ahead of the close, as wider cash ACGB trade sees 0.5bp of richening to 5.0bp of cheapening, with a pivot around 5s and a parallel shift in the 10+-Year zone.

• There wasn’t an overt driver for the move, leaving us to suggest that the lack of willingness to force a meaningful move below the 0bp level in the AU/U.S. 10-Year yield spread may be at the fore, with the latest bounce away from that level observed in Sydney trade, alongside the early weakness in ACGBs, before a correction off of worst levels.
• Bills run +2 to 1 through the reds, with RBA dated OIS pricing a terminal rate of ~3.95%, little changed on the day.
• Melbourne Institute inflation expectations data was unchanged at 5.4% in October, with the reading operating a little over 1.0ppt off its cycle peak.
• Looking ahead, Friday will see a A$700mn of ACGB Apr-27 supply, the release of the weekly AOFM issuance slate and local reaction to Thursday’s U.S. CPI print.