Holding Off Best Levels

Aussie bonds and the IR strip continue to hold a little below best levels amidst relatively light macro headline flow, with lingering weakness in crude providing some support to core FI markets.

• The ACGB cash curve has bull flattened, seeing yields run 12-16bp lower at typing. YM and XM are +12.5 and +15.0 respectively, while bills run +5 to +14bp through the reds.
• Note that a previously-flagged revision in Westpac chief economist Bill Evans’ RBA view helped the space back from best levels. Evans now looks for back-to-back 50bp hikes over the next couple of RBA meetings, adjusting his terminal rate view to 2.60% (from 2.35%) accordingly. Evans expect that level to be reached in February, with his view still less aggressive than that held by market participants.
• STIR markets have seen little movement re: expectations for tightening in July, with the IB strip pricing in ~45bp of tightening for that meeting, with a cumulative ~250bp of tightening priced in for the remaining six meetings of calendar ’22 (comparing to the ~275bp priced early on Wednesday.
• The release of the weekly AOFM issuance slate headlines domestic matters on Friday, which means that wider macro matters should remain at the fore.