Soft Retail Sales Generate A Fresh Bid

Aussie bonds firm in the wake of a much softer than expected outcome for domestic retail sales data, leaving YM +6.0 & XM +2.0 at typing, a touch of their respective post-data highs. Meanwhile cash ACGBs run 2.5-6.0bp richer as the curve bull steepens. EFPs are virtually flat on the day. Bills sit 2-4bp richer through the reds, with 1bp of tightening coming out of RBA dated OIS covering next week’s meeting (23bp of tightening till priced) alongside terminal cash rate pricing of just under 3.75% (vs. the ~3.80% observed earlier today).

• A reminder that the health of the consumer is a focal point for the RBA as the lagged impacts of monetary policy tightening take hold.
• The ABS noted that “this is the first monthly fall in retail turnover for 2022, following eleven consecutive monthly rises. Retail turnover remains elevated at its sixth highest level in the series and was up 7.5% through the year. The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures. Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event.” This also points to some difficulties re: accounting for seasonal adjustments.
• Also note that the Nov reading was revised 0.3ppt higher to +1.7% M/M, which weighed further on the Dec reading.