Dealing On A Weak Note Despite Bldg Apps Miss, CPI & Retail Sales Tomorrow

ACGBs (YM -4.0 & XM -1.5) are cheaper and near Sydney session lows despite June’s Building Approvals undershooting expectations at -6.5% m/m versus -2.3% est. Private-sector home approvals fell 0.5% m/m versus a revised +1.9% in May.

• The market focus remains focused on tomorrow’s Q2/June CPI and June Retail Sales data.
• Headline CPI rose to 4.0% and trimmed mean to 4.4% in May. If the data print in line with RBA May expectations of 3.8% for headline and trimmed mean, requiring 1.0% q/q and 0.8% quarterly rises, then rates are likely to be unchanged at the August 6 meeting.
• Retail sales for June are forecast to rise for the third straight month. Sales were stronger than expected in May rising 0.6% m/m and consensus is at +0.2% for June. Q2 sales volumes are also released and projected to decline by 0.2% q/q after -0.4% in Q1.
• Cash US tsys are slightly cheaper in today’s Asia-Pac session ahead of tomorrow’s FOMC decision.
• Cash ACGBs are 1-3bps cheaper, with the AU-US 10-year yield differential at +11bps.
• Swap rates are 1-3bps higher, with the 3s10s curve flatter.
• Bills strip pricing is -2 to -4.
• RBA-dated OIS pricing is slightly firmer across meetings. Terminal rate expectations sit at 4.43%.