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Sharply Cheaper After Q3 & September CPI Data Increases Chances Of A Nov Hike

AUSSIE BONDS

ACGBs (YM -12.0 & XM -5.0) are 5-8bps cheaper after Q3 and September CPI printed higher than expected. Consequently, these outcomes have amplified concerns regarding the possibility of another interest rate hike in November, as it appears that inflation may be slowing less than the desired rate.

  • RBA Governor Bullock said the board will hike again “if there is a material upward revision to the outlook for inflation”. This data is likely to result in an upward revision to near-term RBA CPI forecasts, but the key will be the outlook further out. Q2 2025 already stands at 3.1%, marginally above the top of the band.
  • Cash ACGBs are 5-9bps cheaper after the data, with the AU-US 10-year yield differential 6bps higher on the day at -10bps.
  • Swap rates are 4-8bps higher after the data and 4-12bps higher on the day. The 3s10s curve is flatter on the day.
  • The bills strip is sharply weaker, with pricing -8 to -16.
  • RBA-dated OIS pricing has shunted 10-15bps firmer on the day across meetings.
  • A 78% chance of a 25bp rate is priced for the November meeting. Terminal rate expectations firm to 4.47% (+40bps) from 4.34% pre-data.
  • Tomorrow, the local calendar sees an appearance by RBA Governor Bullock before the Senate Economics Legislation Committee, along with Terms of Trade data.
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