Richer, US Tsy Yields Lower Ahead Of Weekend, RBA Decision Tomorrow

ACGBs (YM +6.0 & XM +8.0) are higher as US tsys finished richer in trading ahead of the weekend. There was an immediate bid after a lower-than-estimated gain in the Employment Cost Index (1.0% vs. 1.1% est). However, rates quickly reversed the gap move as markets deemed it an overreaction to near-in-line data. Core PCE printed in line at 4.1%, with core non-housing services, the Fed’s preferred indicator, easing a tenth to 0.22% m/m.

• This week the focus turns to ISM Mfg on Tuesday (46.98 est, prices paid 44.0 est), ADP on Wednesday (+188k est vs. +497k prior), and Non-Farm Payrolls on Friday (+200k est vs. +209k prior).
• Cash ACGBs opened 7-8bp richer with the AU-US 10-year yield differential -2bp at +4bp.
• Swap rates are 6-8bp lower.
• The bills strip bull flattens with pricing flat to +5.
• Today the local calendar sees the MI Inflation Gauge, Private Sector Credit and CoreLogic House Prices data, ahead of the RBA Policy Decision on Tuesday. Bloomberg consensus expects a 25bp hike to 4.35%.
• (AFR) Australia’s policy tightening campaign is approaching its final stages, with money markets and economists divided over the timing of the Reserve Bank’s likely last interest-rate increase in this cycle. (See link)
• RBA-dated OIS pricing is 2-6bp softer for meetings beyond November.