Post-CPI Rally Extends After FOMC Decision

ACGBs (YM +5.0 & XM +6.0) have extended yesterday’s post-CPI rally after a strong post-FOMC reaction from US tsys. The US Federal Reserve left rates on hold, as was unanimously expected, but signalled it is getting closer to lowering policy rates. Fed Chair Powell left the door open to a rate cut at the next FOMC meeting in September provided the next two CPI reports give no cause for alarm.

• A late surge saw projected rate cut pricing into year-end strengthen vs. early Wednesday levels: Sep'24 cumulative -28sbp, Nov'24 cumulative -47bps, Dec'24 -72bps.
• The US 2- and 10-year yields finished ~10bps lower.
• Commodities surged on geopolitical risks, with oil jumping 5% and gold popping ~1.5%.
• CoreLogic home values rose 0.5% m/m in July (+7.9% y/y), with Sydney +0.3% m/m, +5.6% y/y; Melbourne -0.4% m/m, +0.2% y/y and Brisbane +1.1% m/m, +16% y/y.
• Cash ACGBs are 4-6bps richer, with the AU-US 10-year yield differential at +3bps.
• Swap rates are 5-6bps lower, with the 3s10s curve flatter.
• The bills strip has bull-flattened, with pricing +1 to +6.
• RBA-dated OIS pricing is 1-4bps softer across meetings beyond August. A cumulative 16bps of easing is priced by year-end.
• Today, the local calendar will also show the Trade Balance and Judo Bank PMI Mfg data.