NAB On Post-CPI BEIs

NAB note that "the softer than expected Q121 CPI print in Australia has dented breakeven inflation levels a little, with declines of about 10bp across the curve. The shorter dated lines have modestly underperformed, but, with carry remaining positive due to the impulse from the Q320 and Q420 inflation prints the underperformance has been marginal and the BEI curve remains flat. With U.S. BEIs stretching to new highs for the cycle this week (the 10-Year has pushed through 2.40%), 10-Year ACGB BEIs at a 25bp discount to that level could be said to look a little cheap, but, with the Q121 CPI print failing to show even the expected transitory uplift in inflation, that gap might be somewhat slow to close. Interestingly BEIs across the Australian curve are still higher than early April, prior to full economist CPI forecasts beginning to be released; if they retreat back to those levels (about 10bp lower in most parts of the curve) then the short term value case might be stronger."