Supported By Softer Than Expected GDP Data

Softer than expected domestic Q3 GDP data provides a light bid for ACGBs, with YM now +4.0 & XM +5.0, as the contracts nudge away from their respective Sydney lows. Wider cash ACGB trade sees the major benchmarks printing 2.5-5.0bp richer across the curve, with the 10- to 12-Year zone leading.

• While the RBA’s clear focus is on returning inflation to the target band, it has noted that the policy path required to do so puts it on a narrow path re: keeping the economy on an even-keel. Today’s release isn’t anywhere near worrying levels re: GDP growth, but the bank will watch the evolution of economy (with a particular focus on household spending, which rose 1.1% Q/Q in Q3) as the lagged impact of tighter monetary policy takes hold in the coming months.
• Note that EFPs are a touch higher on the day, which indicates that payside swap flows may have aided the early tick away from overnight highs in futures/capped the catch-up bid in cash ACGBs.