Firmer Ahead Of Local Data, But Off Best Levels

After re-visiting last week’s pre-wages levels early yesterday, ACGBs initially build on U.S. Tsy-induced strength, before fading from best levels, leaving YM +3.0 & XM +1.0 ahead of the local data drop. While Q4 Current Account data will help firm up forecasts for tomorrow’s Q4 GDP (BBG consensus forecast for GDP is +0.7% Q/Q), the market will more likely be focused on the monthly data prints of Retail Sales, Private Sector Credit and CoreLogic House Prices. A weaker-than-expected bounce back from the likely Black Friday-induced 3.9% slump in retail sales in December could be interpreted as a confirmatory signal that household demand had finally succumbed to the RBA’s tightening cycle. While the plight of house prices has further to run (-8.7% annual rate in January), the market’s attention is likely focused on whether the recent run of milder monthly declines continued in February. Cash ACGBs are flat to 3bp lower in yield with the 3/10 curve 2bp steeper.

• The AU/US cash 10-year yield differential is unchanged at -5bp.
• 3s10s swaps curve 2bp steeper with rates flat to 2bp lower.
• Bills are 5-6bp firmer through the reds.
• RBA dated OIS gives back 2-3bp of yesterday’s +7-12bp firming for meetings beyond June, with terminal rate pricing back at 4.32%.