Dealing At Session Lows, Sharply Cheaper Ahead Of US PPI & Claims Data

ACGBs (YM -15.0 & XM -13.0) have extended overnight weakness and are hovering just above the lows seen during the Sydney session. Despite a relatively light domestic calendar, today's pronounced cheapening reflects the ongoing impact of yesterday's US CPI data. This trend persists despite the slight bull-steepening observed in the US yield curve during today's Asia-Pacific session. Cash US tsys are dealing flat to 3bps richer, ahead of today’s PPI and Claims data.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Household Spending and Consumer Inflation Expectations data.
• Cash ACGBs are 13-14bps cheaper, with the AU-US 10-year yield differential 4bps lower at -28bps, marking the lower end of its trading range since late 2022.
• Swap rates are 13-14bps higher, with EFPs mixed.
• The bills strip has bear-steepened, with pricing -3 to -17.
• RBA-dated OIS pricing is 9-13bps firmer for meetings beyond September. A cumulative 24bps of easing is priced by year-end.
• (AFR) Higher US inflation has dashed hopes of a local interest rate cut this year, as economists warn that borrowing costs may need to go higher to offset a “dangerous” policy cocktail of stimulus from green industrial subsidies and income tax cuts. (See link)
• Tomorrow, the local calendar is empty.