Early Bid Gives Way

Aussie bonds were subjected to swings surrounding wider macro inputs ahead of the weekend, with a lack of meaningful domestic catalyses observed during Friday’s session. That left YM +1.0 & XM +0.5 at the bell, comfortably shy of their overnight/early Sydney highs.

• Meanwhile, wider cash ACGBs run flat to 2bp richer, with the belly outperforming on the curve.
• The initial catch-up/adjustments to the overnight bid linked to the post-U.S. CPI richening in U.S. Tsys ran out of steam as JGBs were pressured by the latest speculative attack on the BoJ’s YCC settings (covered in more detail in other bullets).
• Book squaring probably aided the move given the run richer observed YtD, with the AU/U.S. 10-Year yield spread widening by ~5bp in Sydney hours.
• Softer than expected domestic housing finance data failed to impact the space.
• Bills were 2-5bp richer through the reds come the close, generally tracking the moves in bonds to finish comfortably shy of best levels.
• RBA dated OIS covering the Feb meeting is still showing ~20bp of tightening, although terminal cash rate pricing has come off at the margins post-U.S. CPI, finishing today just above 3.70%.
• Looking ahead, next week’s local docket includes the monthly labour market report, consumer inflation expectations data and the Westpac consumer confidence reading.