Richer With US Tsys After Dovish Fedspeak, CPI Monthly Due Today

ACGBs (YM +6.0 & XM +5.0) are richer after US tsy short end yields drop sharply, the 2-year yield 12bps lower at 4.48%, on less than hawkish Fedspeak from Governor Waller. In the Q&A, Waller suggested that if inflation continues to cool for maybe three to five months, the Fed could lower the policy rate.

• The 10-year fell 7bps to 4.32%, not seen since September, despite the cheapening impulse from the largest tail (2.1bps) for a 7Y tsy auction since Nov 2022.
• The latest JP Morgan client survey showed that active investors in US tsys were the most bullish they have been in the history of the survey (back to 1991). Some 78% of active clients were long US tsys relative to benchmark, up from 56% the previous week, none were short, and the rest were neutral.
• Cash ACGBs are 5-6bps richer, with the AU-US 10-year yield differential 3bps wider at +13bps.
• Swap rates are 4-5bps lower.
• The bills strip has bull-flattened, with pricing flat to +8bp.
• RBA-dated OIS pricing is 3-5bps softer for meetings beyond May’24.
• Today October CPI is due and forecast to moderate to 5.2% from 5.6% on lower fuel prices. There is also Q3 construction data.
• Today, the AOFM plans to sell A$800mn of the Jun-35 bond.