Sharply Cheaper, US Yields Continue To Push Higher, Retail Sales Due

ACGBs (YM -6.0 & XM -8.5) are sharply cheaper as US tsy yields continue to make fresh cycle highs. The 2-year and 10-year yields finished 7bps higher at 5.135% and 4.61%, respectively.

• The moves were underpinned by rising oil prices, a potential federal government shutdown within days and escalating labour disputes, principally with the United Auto Workers.
• Comments from Fed Kashari that the Fed may have to do more than one further hike also weighed. However, he noted that a US government shutdown or prolonged strike by automotive workers could slow the economy, meaning the Federal Reserve wouldn’t have to use its tools to ease price growth.
• (AFR) Goldman Sachs has put the odds of a US government shutdown at 90% and said it expects a shutdown to last two to three weeks. “In the seemingly unlikely event that Congress passes a short-term extension, we would still expect a shutdown sometime later in the fourth quarter.”
• Cash ACGBs have opened 5-8bps cheaper, with the AU-US 10-year yield differential at -15bps.
• Swap rates are 5-8bps higher, with the 3s10s curve steeper.
• The bills strip bear-steepens, with pricing -3 to -6.
• RBA-dated OIS pricing is 2-4bps firmer for '24 meetings.
• Today the local calendar sees Job Vacancies (Q3) and Retail Sales (Aug).