Feeling The Squeeze

The market squeezed higher in the wake of the latest batch of domestic labour market data, with short/paid positioning in Aussie rates squeezed.

• To recap, March’s Australian labour market report provided a modest disappointment, but the labour market remains unequivocally strong. Headline job growth fell short of the +30.0K median exp. observed in the BBG survey, rising by 17.9K, driven solely by full-time job gains as part-time employment recorded a modest fall in March. The participation rate held steady at 66.4%, with the headline unemployment rate also holding steady at cycle/multi-decade lows of 4.0% vs. the BBG median 3.9%. Note that the unemployment rate nearly made it to rounding territory, printing a 3.9542%. ABS noted that seasonally adjusted hours worked decreased by 0.6%, “with floods in New South Wales and Queensland, a higher than usual number of people reported working reduced hours due to bad weather in March. This was in addition to the high number of people away from work due to illness.” The underemployment & underutilisation rates hit fresh cycle lows of 6.3% & 10.3%, respectively. Note that the labour market remains extremely tight, with forward-looking indicators pointing to further tightening. This report will not be a gamechanger for the RBA.
• That leaves YM +14.0 & XM + 11.0 at typing. EFPs are marginally wider, with the 3-/10-Year box flattening.
• The IR strip runs -3 to +18 through the reds. Underperformance in IRM2 was facilitated by a higher 3-month BBSW fixing.
• A reminder that the proximity to the elongated Syndey weekend may have accentuated the short covering, with geopolitical worry remaining elevated.