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Sharply Richer As US Tsy Yields Decline After US CPI Miss

AUSSIE BONDS

ACGBs are sharply richer (YM +10.0 & XM +7.5) after US tsys surged 6-16bp richer following lower-than-expected June CPI: MoM (0.2% vs. 0.3% est), YoY (3.0% vs. 3.1% est); Ex Food and Energy MoM (0.2% vs. 0.3% est), YoY (4.8% vs. 5.0% est).

  • The CPI report led the market to think that the forthcoming 25bp hike from the Federal Reserve would be the final one. The market places the chance of a July Fed hike at 90%, but the odds of further hikes softened. November cumulative tightening eased to 31bp from 35bp.
  • According to MNI's technicals team, Aussie 3yr futures extended a bounce to trade strongly into the Wednesday close. Further progress is needed from here to test the next resistance at 96.730, the Jun 2 high. The recovery looks corrective, with key support at 95.960, the Jun 17 2022 low (cont), having been cleared. This marked a significant bearish break.
  • Cash ACGBs opened 8-11bp richer with the AU-US 10-year yield differential +1bp at +19bp.
  • Swap rates are 7-10bp lower with the 3s10s curve steeper.
  • The bills strip bull steepens with pricing +2 to +11.
  • RBA-dated OIS pricing is 4-9bp softer for meetings beyond November.
  • Today the local calendar sees June MI Inflation Expectations.
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