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Richer After CPI Miss, 50bps Of Easing Priced By Year-End

AUSSIE BONDS

ACGBs (YM +6.0 & XM +4.5) are 3-4bps richer after Q4 CPI undershot market expectations printing +0.6% q/q (4.1% y/y) for Headline and +0.8% q/q (4.2% y/y) for Trimmed Mean versus expectations of +0.8% q/q and 4.3% y/y for Headline and +0.9% q/q and 4.3% y/y for Trimmed Mean. From the ABS website:

  • "The most significant contributors to the December quarter rise were Housing (+1.0 per cent), Alcohol and tobacco (+2.8 per cent), Insurance and financial services (+1.7 per cent), and Food and non-alcoholic beverages (+0.5 per cent)."
  • "Rental prices rose 0.9 per cent for the quarter, following a 2.2 per cent rise in the September quarter. The rate of quarterly growth was moderated by changes to Commonwealth Rent Assistance. Excluding the changes to rent assistance, rental prices would have increased by 2.2 per cent in the December 2023 quarter."
  • Cash ACGBs are 5-6bps richer on the day, with the AU-US 10-year yield differential 3bps tighter at +6bps.
  • Swap rates are 5-6bps lower, with EFPs slightly wider.
  • The bills strip has bull-flattened, with pricing +3 to +9.
  • RBA-dated OIS pricing is 2-5bps softer for meetings beyond March, with a cumulative 51bps of easing is priced by year-end.
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