Sharply Cheaper, US Tsys Pressured By Canadian CPI, Oil and the FOMC’s Dot Plot

ACGBs (YM -6.0 & XM -5.0) are sharply weaker after US tsys were pressured, with yields lifting to their highest levels since 2007.

• Selling started just before the US open and accelerated on the release of higher-than-expected Canadian CPI data. Yields then made new highs with traders apparently nervous ahead of FOMC later today, with fears around revised projections and dot plots which currently imply 100bps of easing in 2024.
• US tsys are already at risk of a third straight year of losses, with the market down 0.3% in 2023, according to Bloomberg. US tsys lost 12.5% in 2022 after being in the red by 2.3% the year prior.
• (AFR) Rating agencies have poured doubt on NSW Treasurer Mookhey’s pledge to return NSW’s finances to surplus in two years after his first budget revealed almost A$8bn to boost public sector wages and baked in expensive election promises. (See link)
• Cash ACGBs have opened 5bps cheaper, with the AU-US 10-year yield differential at -14bps.
• Swap rates are 4-5bps higher.
• The bills strip has bear-steepened, with pricing -2 to -6.
• RBA-dated OIS pricing is 5-7bps firmer across meetings beyond Feb'24.
• Today the local calendar sees Westpac’s Leading Index.
• Today the AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond.