Richer, Haven Flows In Play, Cash US Tsys To Re-Open After Yesterday’s Holiday

ACGBs (YM +6.0 & XM +9.0) are sharply richer as global bond markets reacted to the war between Israel and Hamas. Israel declared war on Hamas, mobilised 300,000 reservists and began a “complete siege” of the Gaza Strip. Oil prices are up around 4% on supply fears.

• Along with haven demand, US Tsy futures were supported by balanced comments from Fed Vice Chair Philip Jefferson. “I am particularly attentive to upside risks to inflation, such as those associated with the economy and labour market remaining too strong to achieve further disinflation, as well as risks associated with unexpected increases in energy prices,” said Jefferson.
• Cash US Tsys should gap lower in yield when the market re-opens for the Asian session following yesterday’s Columbus holiday.
• Cash ACGBs are 5-9bps richer, with the 3/10 curve flatter.
• Swap rates are 4-7bps lower, with EFPs ~2bps wider.
• The bills strip has bull-flattened, with pricing +1 to +5.
• RBA-dated OIS pricing is 2-6bps softer for ’24 meetings, with Nov’24 leading. Terminal rate expectations have softened by 3bps to 4.18% (+11bps), the lowest level since mid-September.
• Today, the local calendar shows Westpac Consumer and NAB Business Confidence data.