Holding Sharply Cheaper, RBA Policy Decision Tomorrow

ACGBs (YM -15.0 & XM -12.0) are holding sharply lower after dealing in relatively narrow ranges in today’s Sydney session. While the local market saw a raft of data releases (PMIs, Inflation Gauge, Trade Balance and Job Ads), US tsys were the key driver for ACGBs today.

• Cash US tsys are 2-6bps cheaper in today’s Asia-Pac session following Fed Chair Powell's appearance on 60 Minutes. This comes after Friday’s aggressive sell-off sparked by much stronger-than-expected Nonfarm Payrolls data.
• Cash ACGBs are 12-14bps cheaper, with the AU-US 10-year yield differential 6bps tighter at +4bps.
• Swap rates are 12-14bps higher.
• The bills strip has sharply bear-steepened, with pricing -4 to -16.
• RBA-dated OIS pricing is 6-15bps firmer for meetings beyond March ahead of tomorrow’s RBA Policy Decision. A cumulative 48bps of easing is priced by year-end.
• Tomorrow, the local calendar sees 4Q Retail Sales Ex Inflation, ahead of the RBA Policy Decision. Bloomberg consensus is unanimous in expecting a no-change decision.
• Bloomberg reported that Sally Auld, chief investment officer at JBWere, believes the RBA may seek to push back against market bets on any sort of rapid pivot toward interest-rate cuts at Tuesday’s policy meeting. (See link)