Shifted Cheaper With US Tsys In Asia-Pac Session, Profit-Taking After Post-FOMC Rally

ACGBs (YMH4 -3.6 & XMH4 -1.9) are cheaper and at Sydney session lows after US tsys cheapen in today’s Asia-Pac session.

• Considering the market is currently priced for 130bps of easing by November 2024, compared to the dot plot median easing of 75bps for 2024, local participants may perceive the market as overbought. Consequently, the early weakness observed today seems to be driven more by profit-taking following an assertive post-FOMC rally.
• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Judo Bank Flash PMIs.
• Cash ACGBs have reversed early strength to be 2-3bps cheaper, with the AU-US 10-year yield differential 2bps wider at +20bps.
• Swap rates have also changed direction, with rates 3-5bps higher.
• The bills strip has cheapened further, with pricing -4 to -6.
• RBA-dated OIS pricing is 2-4bps firmer across meetings, with 57bps of easing priced by Feb’25.
• CEO Ross McEwan said in a speech at the National Australia Bank’s annual meeting that with demand for natural resources and strong employment and migration, Australia’s economy is well positioned to improve in the second half of next year. (See link)