Meandering Into The Weekend After Giving Back Some Of Thursday’s Rally

Aussie bond futures meandered through the final Sydney session of the week, and never really detached meaningfully from late overnight session levels, after cheapening in lieu of some hawkish ECB speak and weakness in global core FI markets in overnight trade.

• That left YM -4.0 & XM -7.5, operating a little above their respective overnight bases for the duration of Sydney dealing. Wider cash ACGBs are 4-8bp cheaper across the curve, with some steepening observed.
• Swaps generally tracked bonds, leaving EFPs little changed vs. late Thursday levels.
• Bills finished +1 to -4 through the reds, twist steepening.
• RBA dated OIS is showing ~19bp of tightening for next month’s meeting, a little higher vs. levels seen yesterday, in lieu of the cheapening in bonds and perhaps an outsized move on the back of yesterday’s soft labour market data (which, when coupled with still elevated vacancies, still points to an extremely tight labour market and shouldn’t impact RBA meaningfully come next month’s meeting, nor over the longer term, at least in isolation). Terminal cash rate pricing was also a touch higher, showing ~3.55%.
• Looking ahead, next week’s local docket includes Q4 (and Dec) CPI data, PPI, terms of trade, the monthly NAB business survey and flash PMI readings from Judo Bank.