Inflation Beat Delivers Blow To ACGBs, 3-Year Yield Hits 3-Year High

Aussie bonds take a hit from above-forecast inflation data released out of Australia. Headline CPI rose 3.5% Y/Y in December, beating the consensus estimate of +3.2%, while the RBA's preferred metric of underlying inflation (CPI trimmed mean) printed at +2.6% Y/Y, topping the median estimate of +2.3%. The trimmed mean gauge also crossed above the mid-point of the RBA's target range of +2.0%-3.0% for the first time since Jun 2014.

• Firmer than expected inflation figures may spark some hawkish RBA repricing, after a solid jobs report published last week prompted revisions to tightening calls.
• ACGB yields shot higher after the release, they last sit 2.5-7.5bp higher across the curve. 3-Year ACGBs lead losses, with the yield on that tenor hitting the highest point since Apr 2019. The main futures contracts have lost ground, YM last -7.5 & XM -3.5. Bills run 3-7 ticks lower through the reds.
• Inflation data overshadowed December business sentiment data from NAB. Business Confidence Index fell to -12 from 12 prior, while Business Conditions slipped to +8 from +11.