Sharply Cheaper, RBA Gov Bullock Gives Little Away Re: Nov Hike

ACGBs (YM -6.0 & XM -13.0) are sharply weaker and at or near Sydney session lows. The data calendar has been relatively light today after yesterday’s CPI release, with Q3 terms of trade data as the sole release. Export prices declined 3.1% q/q (-10.7% y/y), while import prices rose 0.8% q/q (-2.4% y/y).

• That said, the market did have RBA Governor Bullock’s appearance before the Senate Economics Committee to parse for clues on the outlook for policy. On that front, Bullock didn’t give anything away regarding the likely outcome of the November 7 meeting. She said the bank’s forecasts will be altered in November but it’s too early to say whether there will be a “material” change in the inflation outlook and thus the return to target.
• With Q3 CPI in line with RBA expectations, this outlook will be key to whether it hikes next month. The RBA remains “wary” and doesn’t know if “job is done yet”.
• Cash ACGBs are 6-13bps cheaper on the day, with the AU-US 10-year yield differential 5bps higher at -11bps.
• The swaps curve has bear-steepened, with rates 5-13bps higher.
• The bills strip has twist-steepened, with pricing +2 to -5.
• RBA-dated OIS pricing is flat to 4bps softer across meetings on the day, but remains 6-11bps firmer from pre-CPI levels.