Firmer Again

Aussie bond futures extended on their Sydney bid during the overnight session, taking cues from German inflation data and U.S. Tsys, before backing off from best levels alongside wider core global FI markets.

• Still, local reaction to broader global dynamics on Tuesday has facilitated a light bid during the early rounds of Sydney trade, leaving YM +3.0 & XM +7.5 as Tuesday’s flattening bias sticks. Note that both contracts still operate shy of their respective overnight peaks.
• Wider cash ACGB trade sees 3.5-8.5bp of richening.
• Bills run 1-6bp richer through the reds, also bull flattening, while RBA dated OIS has eased a touch, at least from a terminal rate perspective, pricing a terminal cash rate of just over 3.90%, 10bp or so shy of levels seen early yesterday. Meanwhile pricing for next month’s meeting is in by a couple of bp over the same horizon, with ~16bp of tightening now seen.
• There hasn’t been anything in the way of meaningful domestic news flow to digest since the Sydney close and the domestic docket is empty on Wednesday.