Firmer On Global & Domestic Matters, RBA Hike Pricing Moderates

Softer than expected domestic labour market data allowed ACGBs to build on their overnight bid that was derived from soft U.S. data and post-BoJ spill over, with a subsequent round of richening providing further legs to the rally as the Sydney day wore on.

• That left YM +21.0 & XM +23.0 at the close, a little shy of their respective session highs, with the impressive run of early year richening gathering further steam. YM broke above its December peak, allowing bulls to look to the August peak, while XM failed to better its own Dec peak, which presents the immediate point of technical resistance. Cash ACGBs were 17-23bp richer across the curve, with the belly leading the bid.
• Bills finished 11-24bp richer through the reds, as the strip flattened. RBA dated OIS came in on the above mix of factors, with 16bp of tightening now showing for the Feb ’23 meeting, alongside terminal OCR pricing of 3.54%.
• The labour market data saw an unexpected fall in headline employment, while the unemployment rate was actually steady after November’s reading was marked 0.1ppt higher. Note that the fall in unemployment was a product of a move in part-time employment, with illness having a notable impact on hours worked. We don’t think that the release is a game changer for the RBA in isolation, given still elevated vacancy levels and the continued depiction of a very tight labour market.
• Friday’s local docket is empty.