Richer & At Best Levels, US Tsys & JGBs Provided Spillover Benefits

ACGBs (YM +3.0 & XM +6.5) are at Sydney session highs despite the November RBA Minutes seemingly leaving the door ajar for another rate hike. The Minutes stated that the forecasts for inflation assumed another 1-2 more rate rises and the risks around inflation not returning to target by 2025 had risen.

• Earlier at the ASIC Annual Forum, RBA Governor Bullock stated that the biggest challenge facing the economy is inflation. She also pointed out that the current inflation problem is not just due to the supply side but that there are also underlying demand pressures, which the central bank is trying to contain.
• Today’s ACGB rally has been aided by an extension of yesterday’s rally in longer-dated US tsys in today's Asia-Pac session.
• Richer longer-dated JGBs following a solid 20-year JGB auction also provided spillover benefits.
• Cash ACGBs are 4-7bps richer, with the AU-US 10-year yield differential at +5bps.
• Swap rates are 5-7bps lower, with the 3s10s curve flatter.
• The bills strip has twist-flattened, with pricing -1 to +4.
• RBA-dated OIS pricing is flat to 3bps softer across meetings.
• Tomorrow, the local calendar sees the Westpac Leading Index, along with a speech by Governor Bullock at the ABE dinner.
• Tomorrow, the AOFM plans to sell A$800mn of the Dec-34 bond.