Richer With US Tsys, Retail Sales & Bldg Apps Due

ACGBs (YM +5.0 & XM +4.0) are richer, with the curve flatter, after US tsys finished 1-2bps richer on Monday. The yield on the US tsy 10-year fell below 4% after the NY Fed said December median inflation expectations for the one-year-ahead horizon reached the lowest level recorded since January 2021.

• AFR reported that Goldman Sachs continues to expect the first US rate cut in March and five cuts in 2024. Meanwhile, JPMorgan sounded a cautionary warning stating that absent a growth threat, it will take more time for central banks to conclude that core inflation is on a path to move sustainably below 3%.
• Projected rate cuts for early 2024 gained slightly on Monday: March is pricing 16bps of easing and May at -38bps.
• The market remains focused on CPI/PPI inflation measures on Thursday/Friday respectively.
• Cash ACGBs are 4-6bps richer, with the AU-US 10-year yield differential 2bps tighter at +9bps.
• Swap rates are 3-5bps lower, with EFPs slightly wider.
• The bills strip has bull-flattened, with pricing flat to +6.
• RBA-dated OIS pricing is 1-5bps softer for meetings beyond March.
• On the data front today we have Retail Sales and Building Approvals.