Little Changed After A Dovish ECB Hike & Stronger US Retail Sales

ACGBs (YMZ3 -0.2 & XMZ3 +0.7) are little changed after a dovish hike from the ECB and stronger than expected US data left US tsys ~4bp cheaper. EGB yields, on the other hand, finished 3-6bp lower.

• The ECB raised rates to a record high of 4% but sent a clear message it was probably done with raising rates as economic growth slows. The statement said “…the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.” Lagarde did however add the caveat that she “can’t say that now we are at peak”.
• US retail sales beat market expectations, although there were downward revisions. Headline sales of 0.6% m/m in August were boosted by higher gasoline prices. Headline PPI data was higher than expected, boosted by gasoline prices, but core printed in line at + 0.2% m/m.
• Cash ACGBs have opened flat to 1bp richer, with the AU-US 10-year yield differential 4bp lower at -18bp.
• Swap rates are flat to 2bp lower.
• The bills strip is little changed, with pricing +/- 1.
• RBA-dated OIS pricing is flat to 1bp softer across meetings.
• Today the local calendar is empty.