Steeper On Wider Impetus, Retail Sales Eyed

The broader steepening theme witnessed across core global FI markets allowed Aussie bond futures to bear steepen during post-Sydney trade, with an early overnight uptick more than reversed.

• That leaves YM -1.0 & XM -6.0 shortly after the re-open, a little above their respective overnight bases.
• Bills run 1-2bp richer through the reds. RBA dated OIS currently prices ~43bp of tightening for the October meeting, just below levels seen late Tuesday. Terminal rate pricing sits at ~4.30%, also just below levels seen late Tuesday.
• Wednesday’s local highlights include A$800mn of ACGB Nov-33 supply and August retail sales data (BBG median +0.4 M/M vs. +1.3% in July).
• The latter represents a notable source of risk for the RBA, and one that has gained prominence in recent rounds of communique from officials, as well as some of the more recent post-meeting statements from the Bank e.g. the September meeting statement saw the Bank note that “an important source of uncertainty continues to be the behaviour of household spending.” This was perhaps a step down from the “a key source of uncertainty continues to be the behaviour of household spending,” which was deployed in August, with retail sales proving a little more resilient than most expected in July.