Subdued Dealings Ahead Of Thanksgiving Holiday, Gov Bullock’s Speech Continues To Weigh

ACGBs (YM -7.0 & XM -3.5) are cheaper, but off the worst levels, in a generally subdued Sydney session ahead of the US Thanksgiving holiday. Japan is out today in observance of their Labour Thanksgiving holiday.

• Other than the previously outlined flash Judo Bank PMI data, the local calendar has been light. This has contributed to the narrow ranges so far in the Sydney session.
• Nevertheless, the fallout from RBA Governor Bullock’s relatively hawkish speech after-market yesterday continues to weigh. In summary, the Governor noted that the final stretch of reducing inflation to target will take longer than the initial leg. Additionally, she stated that “the remaining inflation challenge we are dealing with is increasingly homegrown and demand-driven…a more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy’s potential to meet that demand”.
• Cash ACGBs are 4-7bps cheaper, with the AU-US 10-year yield differential 5bps higher at +8bps.
• Swap rates are 3-6bps higher, with EFPs tighter and the 3s10s curve flatter.
• The bills strip has bear-steepened, with pricing -4 to -7.
• RBA-dated OIS has shunted higher, with pricing 2-9bps firmer across meetings. Terminal rate expectations firm 6bps to 4.50%.