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Holding Steady After Post-Wages Rally


YM and XM are flat with U.S. Tsys firmer at the bell, but off season highs after FOMC Minutes revealed “a few” members wanted to hike 50bp, while rhetoric surrounding financial conditions also provided a hawkish tinge. Cash ACGBs open largely flat, holding yesterday’s post-WPI strength. As a reminder, Q4 WPI undershot market & RBA expectations. The print may have also allayed some concerns (sourced via RBA business liaison) of a near-term pick-up in wage growth. That said, with the trade union movement out on the wires yesterday saying “more needs to be done to get wages moving”, the RBA is unlikely to abandon lingering concerns about a wage-price spiral.

  • AU-US 10-year cash yield differential is +3bp wider at -4bp with the 3/10 curve 1bp steeper.
  • Swaps open unchanged across the curve.
  • Bills are -1 to +2bp through the reds.
  • RBA-dated OIS holds yesterday’s post-WPI move, pricing a terminal rate at ~4.20% vs. 4.35% pre-data. March meeting pricing remains at a 95% chance of a 25bp hike.
  • With only Q4 Capex data on the local docket today, the market will be waiting it see if Australian rates can build on post-WPI strength and maintain recent outperformance versus $-bloc peers.

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