Richer, Light Local Calendar

ACGBs (YM +1.0 & XM +3.5) are richer after a relatively subdued close to the week for US tsys. The US tsys curve saw a slight twist-flattening, with yields 3bps higher to 2bps lower. Much higher than expected UofM consumer sentiment delivered fast two-way dealings but that quickly dissipated. Inflation expectations dipped slightly: 1 Yr Inflation (2.9% vs. 3.1% est, 3.1% prior) and 5-10 Yr Inflation (2.8% vs. 3.0% est, 2.9% prior).

• SF Fed’s Daly (’24 voter) used a Fox interview to push back on near-term cut expectations. Market pricing gives a rate cut as soon as March approximately a 50% chance.
• With the next key piece of domestic economic data not due until January 31, Q4 CPI, local participants will have to look offshore for market direction. This week the US calendar sees a raft of economic reports, including Q4 GDP, durable goods orders and the closely watched core PCE deflator. The US earnings season is also in full swing.
• Cash ACGBs are flat to 2bps richer, with the AU-US 10-year yield differential 3bps wider at +15bps.
• Swap rates are 1-3bps lower, with the 3s10s curve flatter.
• Bills are slightly cheaper, with pricing -1 across the strip.
• RBA-dated OIS pricing is little changed. A cumulative 34bps of easing is priced by year-end.