Finishing A Little Cheaper

Aussie bond futures went out just off session cheaps, with YM & XM both -2.0. When it comes to a potential catalyst we would point to a piece from WSJ RBA watcher Glynn, which noted that “there was enough nastiness in Australia’s recent fourth-quarter inflation report to lock in the prospect of several interest-rate increases over the coming months, with the data confirming that the country continues to lag well behind other major economies in the race to tame prices.” The space showed modest to no reaction to NZ labour market data & the Caixin m’fing PMI print out of China. Wider cash ACGBs were ~2bp cheaper across the curve.

• Bills were flat to 5bp cheaper through the reds, steepening. RBA terminal cash rate pricing hovers back around the 3.80% mark, initially pressured by NZ labour market data before edging higher, likely on the Glynn article.
• RBA’s Kohler, Head of Economic Analysis, appeared before the Senate Select Committee on the cost of living. It is worth noting that she was limited in her answers given that the RBA is currently reviewing its forecasts which will be published on February 10 in the Statement on Monetary Policy. She said that the central bank thinks that inflation peaked at the end of last year at around 8%. Kohler reiterated that higher rates were necessary to bring supply and demand into balance and inflation down.
• Building approvals data and the Q4 NAB business survey headline domestically tomorrow, with post-FOMC adjustments set to dominate.