Off Session Lows Ahead of Q4 Partial Data

ACGB futures bounce off last week’s pre-wages levels but remain heavy (YM -8.0 & XM -7.5) after the AOFM sells A$300mn of ACGB Mar-47 with a weighted yield through prevailing mids and a cover ratio just above 2.00x. The release of quarterly Business Indicators data is due shortly with company profits expected to print +1.5% Q/Q in Q4 after an outsized -12.4% in Q3. BI data however can be often misleading given it is constructed on an accounting basis and changes in inventory valuations are booked as a profit or loss. On the inventory front, the large inventory build in Q3 should be reversed in Q4 as goods imports decline and commodity exports rebound.

• Elsewhere, the market will likely keep an eye on JGBs with BoJ Governor-in-waiting Ueda due to appear in front of the upper house of parliament today. His comments on Friday appeared to be the spark for an ACGB bid.
• Cash ACGBs are 5-8bp weaker with the 3/-10-Year curve holding 1bp flatter. Swaps are off session cheaps with rates trading flat to -2bp, led by the 3-year.
• Bills strip remains 2-11bp softer through the reds.
• RBA dated OIS firm a little from the open to be +7-12bp for meetings beyond June, with terminal rate pricing back within striking distance of its cycle high (4.42%) at 4.37%.