Holding Sharply Cheaper, Local Calendar Light

ACGBs (YM -13.0 & XM -11.0) are cheaper and not far from Sydney session lows. With the local calendar empty apart from the AOFM’s A$800mn sale of the 1% December 2030 bond, local participants have been content to track US tsys in today’s Asia-Pac session following yesterday’s aggressive post-CPI sell-off. Cash US tsys are currently dealing flat to 1bp cheaper.

• (AFR) Higher-than-expected US inflation is a timely jolt for Australians pinning their hopes on interest rate cuts this year. (See link)
• The latest round of ACGB Dec-30 supply prices comfortably through mids but with a relatively modest cover ratio of 2.7125x.
• January labour market data print on Thursday and given December’s large 65.1k drop, attention will be on whether labour demand is still strong enough to unwind most of that move. Bloomberg consensus is forecasting a 25k rise in new jobs with the unemployment rate ticking up 0.1pp to 4%.
• Cash ACGBs are 11-12bps cheaper, with the AU-US 10-year yield differential 4bps lower at -4bps.
• Swap rates are 10-12bps higher, with the 3s10s curve flatter.
• The bills strip has sharply bear-steepened, with pricing -2 to -13.
• RBA-dated OIS pricing is 6-10bps firmer for meetings beyond June. A cumulative 27bps of easing is priced by year-end.