Sharply Richer After CPI Monthly Miss

ACGBs (YM +14.0 & XM +12.0) add 7-8bps to morning strength after October’s CPI monthly printed on the low side of expectations at 4.9% y/y versus 5.2% estimate and 5.6% prior.

• Subsidies for electricity and rent have helped to bring inflation down as well as lower fuel prices. The moderation in the trimmed mean was a lot less sanguine with it moving to 5.3% from 5.4%. It is worth noting that the first month of the quarter doesn’t include updated prices for most services and given this sector is showing sticky inflation, the October data is likely underestimating current inflation.
• Given the role of subsidies and lack of updated services prices, it is difficult to gauge the extent of demand-driven inflation from the October CPI release that RBA Governor Bullock spoke about in HK yesterday.
• Cash ACGBs are 12-13bps richer on the day, with the AU-US 10-year yield differential 2bps tighter at +8bps.
• Swap rates are 11-13bps lower on the day, 7-8bps lower post-data. The 3s10s curve is steeper.
• The bills strip has extended the overnight bull-flattening, with pricing +1 to +18bp.
• RBA-dated OIS pricing is 2-14bps softer on the day across meetings.
• Tomorrow, the local calendar sees Private Sector Credit, Private Capital Expenditure and Building Approvals data.