Dealing At Session Highs, US Tsys Richer, Q3 CPI Next Wednesday

ACGBs (YM +5.0 & XM +5.5) sit at highs after grinding higher through the Sydney session. With the local calendar empty, the unwinding of early weakness appears linked to the partial reversal of yesterday’s US tsy weakness in today’s Asia-Pacific session. Cash US tsys are 1-5bps richer, with the curve flatter. Reuters reported that drones had hit US bases in Iraq.

• That said, today’s local price action was also likely supported by technically driven buying. Some local participants have possibly used the heavy price action this week to either cover shorts or enter longs after futures contracts were pushed to cycle lows.
• Cash ACGBs are 5-6bps richer, with the AU-US 10-year yield differential 3bps lower at -21bps.
• Swap rates are 6bps lower, with EFPs little changed.
• The bills strip has bull-flattened, with pricing +2 to +7.
• RBA-dated OIS pricing is 1-7bps softer, with Dec’24 leading.
• Next week, the local calendar sees nothing on Monday, ahead of Judo Bank PMI data and RBA Governor Bullock’s speech at CBA’s Annual Conference on Tuesday. Q3 CPI data is due on Wednesday, with Bloomberg consensus expecting a cooling in headline and core CPI measures. The Trimmed Mean measure is forecast to fall to 5.0% y/y from 5.9%.
• Next Friday, the AOFM plans to sell A$800mn 0.5% Sep-26 bond.