Off Best Levels, Labour Market Report Is No Gamechanger

Wider risk appetite dominated price action for most of the Sydney session, with futures pulling back from their respective Sydney peaks (YM broke above its overnight high, while XM did not) on the previously outlined factors. YM is +3.5, while XM is +6.5 at typing. Wider cash ACGB trade sees the super-long end print 7.0-7.5bp richer on the day. EFPs are incrementally narrower on the session.

• There was a light bid in the wake of the release of the latest monthly domestic labour market. Note that headline employment provided a notable miss vs. exp. (+4.0K vs. BBG median of +30.0K) although a fall in part-time employment was the driver there. Elsewhere, the underemployment and underutilisation measures continued their move lower (registering fresh multi-year lows), while unemployment printed steady at 3.9% (once you account for the downside revision observed in March’s data) as participation softened.
• This shouldn’t be a gamechanger for the RBA. The continued move lower in underutilisation and underemployment bodes well for remuneration, with the RBA’s liaison programme already revealing more notable upward wage pressures than that observed in the lagged WPI data (which is also hindered by its construction when it comes to tracking non-standard remuneration measures). We would argue that yesterday’s WPI reading probably takes any need for a larger than expected 25bp hike off of the table when it comes to the Bank’s June meeting, unless RBA liaison digs up a more timely and meaningful surge in pay awards or it really wants to get back to the traditional 25bp multiples for the headline cash rate target level. Wider risk-off price action observed since yesterday’s close saw IB strip pricing re: the RBA’s June meeting narrow a touch, to price in ~31bp of tightening vs. ~34bp of tightening at yesterday’s Sydney close (per BBG’s WIRP function).
• A$700mn of ACGB Apr-27 supply and the release of the weekly AOFM issuance slate are due on Friday.