Richer After WPI Miss

ACGBs (YM -3.0 & XM -3.0) are weaker but off session lows after the Wage Price Index (WPI) missed forecasts, printing +0.8% q/q versus expectations of +0.9%.

• Q2 WPI ABS media release: “For the third consecutive quarter, wages grew 0.8 per cent. Wage rises from regular June quarter salary reviews were higher than in the same period last year, as recent cost of living and labour market pressures were incorporated into organisation-wide decisions on wages.”
• “Compared to a year ago, fewer jobs had wage increases this quarter, however, on average, the increases received were higher. In particular, the share of jobs which received increases above 3 per cent was the highest for a June quarter since 2012,”
• The RBA Minutes for the August meeting were released also but are unlikely to have a major impact given RBA Governor’s Lowe testimony to Parliament on Friday outlined the key issues.
• Cash ACGBs are 3-4bp richer after the releases, with the AU-US 10-year yield differential 1bp wider at +4bp.
• Swap rates are 3-5bp lower after the releases to be 2-3bp higher on the day.
• The bills strip has twist steepened after the releases with pricing +2 to -4.
• RBA-dated OIS pricing is 4-5bp softer for meetings beyond October after the releases.