Richer But At Session Cheaps, Will The RBA Bow To Political Pressure? (AFR Joye)

ACGBs (YM +2.0 & XM +5.5) are richer but near Sydney session lows after the release of the Q3 PPI data. PPI rose 1.8% q/q (3.8% y/y) in 3Q versus +0.5% q/q (3.9% y/y) in 2Q.

• With the domestic data docket light today, local participants have likely been on headlines and US tsys watch. US tsys 1-2bps cheaper in today’s Asia-Pac session, after yesterday’s strong rally. Newsflow has been light so far today.
• Cash ACGBs are 2-5bps richer, with the AU-US 10-year yield differential 5bps higher at -4bps. As a reference, the 10-year differential was around -30bps in mid-October.
• Swap rates are 1-4bps lower, with the 3s10s curve flatter.
• The bills strip is little changed, with pricing -1 to +1.
• RBA-dated OIS pricing is flat to 2bps softer across meetings. The market currently attaches a 68% chance of a 25bp hike at November’s policy meeting. Terminal rate expectations sit at 4.46%, the highest level since late July.
• (AFR Joye) Will the RBA bow to political pressure? Participants worry that a concerted campaign to politically compromise Australia’s central bank may result in the RBA remarkably choosing not to seek to combat its existential inflation crisis. (See link)