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Sharply Richer After CPI Miss

AUSSIE BONDS

ACGBs (YM +8.0 & XM +2.5) are sharply richer after headline and trimmed mean CPI print lower than expected at +0.8% q/q (+6.0% y/y) and +0.9% q/q (+5.9% y/y) respectively. The market had expected +1.0% q/q (6.2% y/y) for headline and +1.1% q/q (6.0% y/y) for trimmed mean after +1.4% q/q (7.0% y/y) and +1.3% (6.6% y/y) respectively in Q1.

  • Cash ACGBs are 5bp richer after the data with the AU-US 10-year yield differential -4bp at +11bp.
  • Swap rates are 6-7bp lower after the data to be 4-9bp lower on the day with the 3s10s curve 5bp steeper.
  • The bills strip shunts richer with pricing +8 to +14 with late whites leading.
  • RBA dated OIS pricing gaps 6-14bp softer across meetings. The market now attaches a 29% chance of a hike by the RBA in August versus 58% pre-data.

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