Off Extremes After CPI Data Miss

ACGBs sit slightly cheaper to slightly richer ahead of the bell (YM -1.0 & XM +0.5) but off season extremes. The market scaled back gains sparked by a weaker-than-expected CPI Monthly print for February (6.8% Y/Y versus 7.2% expected) in line with an initial weakening in U.S. Tsys in Asia-Pac trade. U.S. Tsys did however reverse course later in the season, assisting ACGBs to lift off their post-CPI cheaps.

• 3-year and 10-year cash benchmarks are flat.
• The AU-US 10-year yield differential is -6bp at -26bp.
• Swap rates are 1-2bp lower and EFPs slightly tighter.
• Bills strip pricing is -1 to -3bp led by the reds.
• The local calendar is light until Private Sector Credit (Feb) data on Friday.
• The market focus however is already likely tuned into the RBA rates decision next Tuesday given today’s data was the last of the releases flagged by RBA Governor Lowe as key inputs to decision in April.
• Based on market pricing, today’s CPI result, coupled with yesterday’s retail spending outcome, should be enough to offset the resilient business survey and strong jobs data and deliver a pause from the RBA. April meeting pricing attaches an 8% chance of a 25bp hike.