Stronger But Well Off Bests Going Into U.S. CPI

In the penultimate session of futures roll ACGBs close at or near Asia-Pac lows (YMM3 +16.6 & XMM3 +7.0) as cash Tsys twist flatten with 2-year yields 18bp higher and the 10-year -1bp. Cash ACGBs strengthen 7-15bp, but well off bets, with 3/10 curve +9bp. The AU-US 10-year yield differential widens 6bp to -12bp. For reference, this differential made a cycle low of -32bp last week.

• Swaps close firmer with rates 2-11bp lower (but 18-20bp off bests) and EFPs 5-6bp wider.
• Bills closed -1 to +39bp with whites leading.
• On the data front, consumer sentiment remained depressed, but business conditions remained robust with broad-based strength (business confidence was soft). In isolation the data would have lent support to a hike in April given it was explicitly cited by RBA Governor Lowe as important for upcoming policy discussions.
• In a significant development however, RBA dated OIS priced, at least temporarily, the end to the tightening cycle. April meeting pricing softened to 2bp of easing with 10bp of easing priced by end-22. At one stage in proceedings more than a full 25bp of easing had been priced.
• Elsewhere, Bloomberg reported today that China will allow all domestic companies to import Australian coal, signaling an end to trade restrictions imposed inn late 2020.
• US CPI for February tonight.