Little Changed, US Tsys Extend Post-FOMC Rally

ACGBs (YMH4 +0.8 & XMH4 +3.3) are slightly firmer after US tsys continued richer. The 2-year yield declined 7bps following yesterday’s 25bp drop, which was the largest daily decline since the collapse of Silicon Valley Bank in March. The 10-year yield fell 10bps to 3.92%, the lowest level since June.

• The ECB left interest rates unchanged at 4.0% for the second consecutive meeting, as expected. In an attempt to curtail easing expectations, ECB President Lagarde said rate cuts were not discussed at all and policymakers mustn’t get complacent following the recent fall in inflation.
• The BOE maintained its policy rate at 5.25%, which was in line with expectations. The vote was split 6-3 with three committee members still favouring a 25bps hike.
• Judo Bank Flash PMI printed: Mfg 47.8 in December vs 47.7 prior, Services 47.6 vs 46 prior and Composite 47.4 vs 46.2 prior.
• Cash ACGBs are 1-3bps richer, with the AU-US 10-year yield differential unchanged at +18bps.
• Swap rates are +/- 1bp, with the 3s10s curve flatter.
• The bills strip is slightly cheaper, with pricing -1 to -3.
• RBA-dated OIS pricing is little changed across meetings, with 60bps of easing priced by Feb’25.