Slightly Richer With US Tsys Ahead Of WPI Data

ACGBs (YM +2.0 & XM +3.5) are stronger after modest gains from US tsys to start a busy week. A haven trade amid increasing tensions in the Middle East and Eastern Europe added to the bullish tone with expectations for a tame CPI report keeping sellers on the sidelines.

• US CPI is due for release on Wednesday. Consensus sees core CPI at 0.2% m/m in July after the far softer than expected 0.065% m/m in June, with a mild skew towards a “low” 0.2% per MNI’s compilation of sell-side previews. (See MNI CPI Preview here)
• Tuesday’s focus will be on US PPI data and Richmond Fed Bostic, who will discuss his economic outlook (no text, Q&A) at 1315ET. PPI data will be scrutinised for categories that feed through to the Fed’s preferred inflation gauge, the personal consumption expenditures price index.
• Cash ACGBs are 3-4bps richer with the AU-US 10-year yield differential at +10bps
• Swap rates are 3-4bps lower.
• Today, the local calendar will see Consumer and Business Confidence, and the Wage Price Index for Q2.
• The bills strip is slightly richer, with pricing +1 to +2.
• RBA-dated OIS pricing is flat to slightly softer across meetings. A cumulative 21bps of easing is priced by year-end.