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Sharply Cheaper As US Recession Risk Pared, RBA Gov. Bullock In Parliament

AUSSIE BONDS

ACGBs (YM -11.0 & XM -9.5) are sharply weaker as US recession risks were pared following better-than-expected retail sales and jobless claims data.

  • The US 2-year closed 14bps cheaper at 4.09%, back over the 4% level again. The US 10-year rose 8bps to 3.91%.
  • July's advance retail sales report showed that the recent unexpected pickup in consumer momentum continued. June retail sales came in well above expectations at 1.0% M/M (0.4% expected, -0.2% prior rev from 0.0%).
  • Initial jobless claims surprised lower for the second consecutive week with a seasonally adjusted 227k (cons 235k) in the week to Aug 10 after a marginally upward revised 234k (initial 233k).
  • Import prices were stronger than expected in July as they increased by 0.1% M/M (cons -0.1) after 0.0%, with non-oil import prices also a little stronger than expected at 0.2% M/M (cons 0.1%).
  • Today, the local calendar will see RBA Governor Bullock before parliament at 0930 AEST.
  • Cash ACGBs are 10-11bps cheaper, with the AU-US 10-year yield differential at +6bps.
  • Swap rates are 10-11bps higher.
  • The bills strip has bear-steepened, with pricing -2 to -13.
  • RBA-dated OIS pricing has shunted 6-12bps firmer across meetings beyond November. A cumulative 18bps of easing is priced by year-end.
  • The AOFM plans to sell A$700mn of the 2.25% May-28 bond today.

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