Modest Twist Flattening To Start The Year, Familiar Themes Digested

ACGB yields sit either side of unchanged to start ’23 as participants return from the festive break and assess softer than expected official PMI data out of China, continued hawkish ECB speak, speculation surrounding a hawkish inflation forecast shift from the BoJ and the continued fallout from the rollback of China’s ZCS.

• That leaves the major cash ACGB benchmarks 0.5bp cheaper to 2.0bp richer as Sydney settles down for the first trading session of the year, with some light twist flattening apparent as the curve pivots around 5s.
• YM is -1.0 while XM is +1.5.
• Bills have also twist flattened, running -1 to +1 through the reds.
• RBA dated OIS prices 17-18bp of tightening for the Feb ’23 meeting, alongside a terminal cash rate of ~4.00%, little changed from levels seen ahead of the turn of the year.
• Note that the effective cash rate was 1bp higher on Friday, printing at 3.07%.
• Lower tier domestic data has already crossed in the shape of final Judo Bank manufacturing PMI & CoreLogic house prices, with the former revealing the slowest rate of expansion seen since ’20 and the latter providing an expected extension of the recent pull lower in property prices.
• There isn’t anything in the way of meaningful onshore risk events to note on Tuesday, with the latest Chinese Caixin manufacturing PMI print providing the headline Asia-Pac risk event.