Slightly Weaker Despite CPI Monthly Miss

ACGBs (YM -4.0 & XM -5.0) are slightly weaker after the release of January’s CPI Monthly. The print was better than expected at +3.4% y/y versus expectations of +3.6% and +3.4% prior.

• (ABS) "The most significant contributors to the January annual increase were Housing (+4.6 per cent), Food and non-alcoholic beverages (+4.4 per cent), Alcohol and tobacco (+6.7 per cent) and Insurance and financial services (+8.2 per cent). Partially offsetting the annual increase is Recreation and culture (-1.7 per cent) primarily due to Holiday travel and accommodation (-7.1 per cent). "
• “When excluding these volatile items from the monthly CPI indicator, the annual rise in January was 4.1 per cent, down from 4.2 per cent in December. "
• “Excluding the rebates, Electricity prices would have increased 15.3 per cent in the 12 months to January 2024.”
• Cash ACGBs are unchanged after the data but 3-5bps cheaper on the day. The AU-US 10-year yield differential is 3bp higher at -12bps.
• Swap rates are 3-5bps higher on the day, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -5.
• RBA-dated OIS pricing is little changed across meetings after the data. A cumulative 33bps of easing is priced by year-end.