Firmer And Flatter On Thursday Spill Over

Aussie bonds remained underpinned on Friday, even with the likes of JGBs and U.S. Tsys cheapening as the day wore on.

• Onshore participants were more attuned to catching up to Thursday’s rally in U.S. Tsys than the aforementioned dynamics observed in the remainder of the core FI sphere, with dips bought. That allowed YM & XM to extend through and close above their respective overnight highs, with the former +7.0 & the latter +9.0. Cash ACGBs were 6-12bp richer as the curve bull flattened.
• Bills were 1-11bp richer through the reds, with flattening also in play there.
• In terms of domestic headline flow, RBA Governor Lowe largely went over old ground on inflation expectations and the resilience of domestic consumers. He also flagged the potential for a more elongated than usual round of delayed pass through from monetary tightening into the economy, highlighting this as a key point re: the RBA’s recent step down in the pace of tightening.
• ACGB Sep-26 supply was well received.
• Looking ahead, Monday’s docket includes final services & composite PMI from S&P Global, Melbourne Institute inflation metrics and another round of Q3 GDP partials.
• The latest RBA decision (Tuesday) & Q3 GDP print proper (Wednesday) headline next week’s domestic docket. 19bp of tightening is priced into dated OIS for next week’s meeting, with a terminal cash rate of 3.60% eyed, in a touch on the day.