Offshore-Driven Weakness Returns

Weakness in the U.S. Tsy space drove Aussie bond futures lower in post-Sydney dealing, with a slight correction from worst levels ahead of the bell. This leaves YM -8.0 and XM -11.0 shortly after the re-open, with both contracts operating 10-15bp above their respective cycle lows.

• The RBA SoMP headlines the domestic docket on Friday, given that the Bank has already outlined the major tweaks to its economic forecasts (headlined by an aggressive upshift in ’22 underlying and headline inflation) most of the focus will turn to any discussion surrounding the evolution of the cash rate and potential neutral rate levels (a reminder that the economic forecasts are based on an end of ’22 cash rate of 1.50-1.75% and Lowe hopes that a 2.50% cash rate can be achieved further out).
• Elsewhere, we will get A$1.0bn of ACGB Nov-27 supply and the release of the AOFM’s weekly issuance slate.