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Sharply Cheaper After All CPI Measures Surprise On The Upside

AUSSIE BONDS

ACGBs (YM -13.0 & XM -4.5) are 4-9bps cheaper after Q3 CPI prints on the high side of expectations for the headline rate as well as the core measures. Headline prints +1.2% q/q (5.4% y/y) versus expectations of +1.1% (5.3% y/y). The Trimmed mean measure prints +1.2% q/q (5.2% y/y) versus expectations of +1.0% (5.0% y/y).

  • Cash ACGBs are 5-9bps cheaper after the data, with the AU-US 10-year yield differential 8bps higher on the day at -9bps.
  • Swap rates are 5-9bps higher after the data and 6-13bps higher on the day. The 3s10s curve is 5bps flatter on the day.
  • The bills strip is sharply weaker, with pricing -12 to -16.
  • After RBA Governor Bullock's hawkish tone in last night's speech, where she suggested a low tolerance for upside revisions to the RBA's CPI forecasts, RBA-dated OIS pricing is 8-12bps firmer across meetings after the data.
  • A 77% chance of a 25bp rate is priced for the November meeting.
  • Terminal rate expectations shunt higher to 4.47% (+40bps) from 4.34% pre-data.
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