Richer After CPI Miss

ACGBs (YM +7.0 & XM +2.5) sit richer, but well off session bests, after Q2 headline and underlying inflation came in lower than RBA forecasts, thus it is on track to meet the target by mid-2025.

• Trimmed mean was lower at 0.9% and 5.9% after an upwardly revised 1.3% q/q and 6.6% y/y. Services inflation rose less than goods on the quarter up 0.8% q/q compared with goods at 0.9% but the annual rate rose 6.3% up from 6.1%.
• June inflation moderated to 5.4% from 5.5% in May. Importantly, 3-month momentum continues to ease towards the top of the RBA’s band and was 3.7% in June.
• Cash ACGBs are 6-7bp richer after the data with the AU-US 10-year yield differential -4bp at +11bp.
• Swap rates are 6-7bp lower after the data to be 3-8bp lower on the day with the 3s10s curve 5bp steeper.
• The bills strip bull steepens with pricing +4 to +10.
• RBA-dated OIS pricing is 5-9bp softer across meetings after the data. The market now attaches a 33% chance of a hike by the RBA in August versus 58% pre-data.
• Tomorrow the local calendar sees Terms of Trade data for Q2.
• Later today, the market’s focus will be firmly tuned to the FOMC meeting decision.