Mid-Session Reversal Sees ACGBs Outperform U.S. Tsys

YM and XM reverse almost all of the early weakness to close -1.0 and flat, respectively, after RBA Governor Lowe's Senate Economics Committee Hearing failed to deliver a message that was meaningfully more hawkish than the one contained in last week’s RBA communique. YM and XM were down as much as -10.0 in early trade. Cash ACGBs saw yields pullback from the morning highs to be flat to up 1bp out to the 10-year zone and flat to -2bp for the 15-30yr benchmarks.

• Swaps rates closed flat to up 2bp after scaling back most of the morning’s weakness to leave the 3s10s curve 2bp flatter.
• The AU-US 10-year yield differential closed at ~+2bp off the morning wides of +6bp.
• Bills were 3-4bp up from session lows, closing +1 to -6 through the reds.
• While March meeting RBA-dated OIS pricing has shown little movement over recent days, attaching a 92% chance of a 25bp hike, terminal rate expectations have moved in a 4.10%-4.22% range with current pricing for Sep/Oct-23 at just over 4.15%.
• In the run-up to tomorrow’s all important January Australian labour market data, the market is likely to find its guidance from abroad with January prints for UK CPI and U.S. retail sales the most noteworthy global data releases.