Richer & At Session Highs Ahead Of Fed Powell’s Testimony & ADP Employment Data

ACGBs (YM +6.0 & XM +7.5) sit richer at Sydney session highs. ACGBs are also holding 2-3bps richer than pre-GDP levels despite Q4 data printing in line with expectations at +0.2% q/q.

• However, annual growth did slow to 1.5% from 2.1% as higher rates, inflation and the unwind of pandemic-related pent-up demand weighed on growth. 2023 slowed to 2.1% from 2022’s 3.8%.
• Growth was driven by government spending, non-dwelling construction and net exports. While GDP was in line with the RBA’s forecasts, domestic demand was weaker. This report is unlikely to change their on-hold stance.
• Cash ACGBs are 5-8bps richer on the day, with the AU-US 10-year yield differential 2bps lower at -13bps.
• Swap rates are 5-8bps lower, with the 3s10s curve flatter.
• The bills strip has bull-flattened, with pricing flat to +7.
• RBA-dated OIS pricing is flat to 5bps softer across meetings, with late-24 leading. A cumulative 42bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Trade Balance, Home Loans Value and Foreign Reserves data.
• Later today, MBA Mortgage Applications, ADP Employment Change, JOLTS Job Openings, Wholesale Inventories and Federal Reserve Releases Beige Book are due to be released. Fed Chair Powell will also testify before Congress.