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AUSSIE BONDS: Richer Ahead Of Tomorrow’s Q4 CPI & FOMC (Thu Morning Local Time)

AUSSIE BONDS

ACGBs (YM +6.0 & XM +5.0) are stronger but off session bests after business conditions improved in December.

  • The NAB survey showed that conditions climbed 3 points to +6, reversing declines from the prior month and almost returning to its long-run average. Business confidence edged up 1 point to -2.
  • Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s strong rally.
  • Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at -12bps.
  • Swap rates are 5bps lower.
  • The bills strip has bull-flattened, with pricing +2 to +7.
  • Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
  • RBA-dated OIS pricing is 1-6bps softer across meetings today. A 25bp rate cut is more than fully priced for April (124%), with the probability of a February cut at 78% (based on an effective cash rate of 4.34%). 
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ACGBs (YM +6.0 & XM +5.0) are stronger but off session bests after business conditions improved in December.

  • The NAB survey showed that conditions climbed 3 points to +6, reversing declines from the prior month and almost returning to its long-run average. Business confidence edged up 1 point to -2.
  • Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s strong rally.
  • Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at -12bps.
  • Swap rates are 5bps lower.
  • The bills strip has bull-flattened, with pricing +2 to +7.
  • Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
  • RBA-dated OIS pricing is 1-6bps softer across meetings today. A 25bp rate cut is more than fully priced for April (124%), with the probability of a February cut at 78% (based on an effective cash rate of 4.34%).