Subdued Trading Ahead Of US CPI

ACGBs (YM -4.0 & XM -3.5) are weaker but above Sydney session lows as global bond markets await today’s US CPI data.

• Consensus puts core CPI inflation at 0.2% m/m in July in what’s likely only a minor uptick from the unrounded 0.16% m/m in June. Analysts see two conflicting (and familiar) drivers on the month: airfares (upside) and used cars (downside). Some expect the Fed’s closely watched core services ex-housing measures to firm from particularly weak flat or near flat readings in June but to still help the trend moderate. See the MNI CPI preview here.
• US tsys have cheapened in Asia-Pac trade, sitting at session lows, with no obvious headline driver. The move aligns with JGBs moving lower. This leaves cash tsys ~1bp cheaper across the major benchmarks.
• Cash ACGBs are 3-4bp cheaper with the AU-US 10-year yield differential 2bp wider at +1bp.
• The 3s10s swaps curve bear flattens, with rates 2-3bp higher.
• The bills strip bear steepens, with pricing -1 to -4.
• RBA-dated OIS pricing is little changed, with terminal rate expectations at 4.23%.
• Tomorrow RBA Governor Lowe’s final appearance before the House of Representatives standing committee on economics headlines.
• In addition to US CPI data later today, the US calendar sees Initial Jobless Claims data.