Firmer As Q122 WPI Provides Marginal Miss

Bonds turn bid as the Q/Q & Y/Y WPI prints provide 0.1ppt misses vs. their respective BBG consensus calls, hitting +0.7% in Q/Q terms and +2.4% in Y/Y terms. While this may lower the odds of a 40bp move at the Bank’s June meeting, the underlying inflation dynamics, RBA view on Australia’s economic resilience and caution surrounding inflation psychology means that a minimum of a 25p hike should be implemented next month. Add into that mix the lagged nature of the WPI release, in addition to compositional questions given recent renumeration trends and the RBA’s willingness to act on liaison programme communique. YM has firmed by ~6bp post release, last printing -2.5 on the day, while XM is -4.5 on the day, richening by ~4.0 bp in the wake of the data.