Remain Richer Despite Stronger Than Expected Domestic Data Drop

ACGBs (YM +6.0 & XM +5.5) are richer and at or near Sydney session highs despite today’s domestic data drop surprising on the strong side. November Retail Sales beat market expectations printing +2.0% m/m versus +1.2% est, while November’s Building Approvals also exceeded expectations printing +1.6% m/m versus -2.0% est.

• Elsewhere, after finishing yesterday’s NY session with moderate gains across benchmarks, cash tsys have extended those gains by 1-2bps in today’s Asia-Pac session. NFIB Small Business Optimism and Trade Balance is due later today. The market however remains focused on US CPI/PPI inflation measures on Thursday/Friday respectively.
• Iron ore fell for a fourth day, with fresh data from China showing the nation’s struggling steel-intensive property sector remains in the doldrums. (See Bloomberg link)
• Cash ACGBs are 5-7bps richer on the day, with the AU-US 10-year yield differential 2bps tighter at +10bps.
• Swap rates are 5-6bps lower on the day, with EFPs slightly mixed.
• The bills strip has bull-flattened, with pricing flat to +8.
• RBA-dated OIS pricing is 1-6bps softer for meetings beyond March. A cumulative easing of 48bps is priced for year-end.