Slightly Richer, US Tsys Bounce Off Cheaps After Dec FOMC Minutes

ACGBs (YM +1.0 & XM +1.5) are slightly stronger following the release of the December FOMC Minutes, which left US tsys little changed. The minutes were balanced but with a dovish tone as officials noted diminished inflation and the need to start a discussion of QT wind down.

• AFR reported that Evercore ISI’s Krishna Guha said the hawkish commentary was predictable. “Our impression is the Committee wanted to clarify it does not see rate cuts as imminent and lean against a March cut specifically, while retaining wide policy optionality in particular on a horizon beyond March, in light of progress on inflation and risks coming into closer balance.”
• Wall Street extended its 2024 declines with weakness in tech shares weighing. The NASDAQ slumped -1.2%, dropping for a 4th straight session, with the S&P 500 and Dow falling 0.8%.
• Cash ACGBs are 1-2bps richer, with the AU-US 10-year yield differential 1bp tighter at +12bps.
• Swap rates are 1-2bps lower, with EFPs little changed.
• The bills strip is little changed, with pricing +/- 1.
• RBA-dated OIS pricing is unchanged.
• Judo Bank Dec. Services PMI 47.1 vs 46 in Nov (revised down from prelim at 47.6) and Composite PMI 46.9 vs 46.2 prior (revised down from prelim at 47.4).