Market Looks Through Upside Data Surprises To Slowing Trends

Despite stronger than expected prints for January retail sales, private sector credit and Q4 current account data (although a modest miss for net exports contribution to GDP), ACGBs deliver a post-data reversal to close nearer to Sydney session highs with YM +4.0 and XM +2.5. Cash benchmarks run 2-4bp richer with the 3/10 curve steepening 3bp.

• The AU/US cash 10-year yield differential closes -3bp at -8bp.
• 3s10s swaps curve bull steepens with rates 2-4bp lower.
• Bills were 1 cheaper to 4bp firmer through the reds, with only IRH3 finishing softer.
• RBA dated OIS gives back 2-5bp of yesterday’s +7-12bp firming for meetings beyond June, with terminal rate pricing back at 4.30% versus last week’s high of 4.35%.
• The market chose to look through today’s upside data surprises, instead focusing on the slowing underlying trends. Despite today’s beat, the volatile Nov-Jan period for retail sales leaves the average monthly change (+0.1% M/M) significantly slower than the average monthly change for the period Aug-Oct (+0.7% M/M). On the private credit front as well, today’s upside surprise did little to arrest the appreciable slowing in the monthly pace of credit growth from +0.9% in April last year to +0.4% in January.
• Tomorrow sees the release of Q4 GDP (BBG consensus forecast is +0.8% Q/Q) and the relatively new, but increasingly important, monthly read on the CPI. We will also hear from RBA's Jones.