The Day After

YM and XM made fresh cycle troughs in early overnight trade, as participants continued to reacte to yesterday’s hawkish RBA decision and post-meeting press conference from Governor Lowe. Wider core global FI gyrations then took hold, before a subsequent overnight drift lower in futures failed to result in a break of the respective cycle lows in the contracts, which operate a couple of basis points above their respective troughs in early Sydney dealing. YM is -2.0 and XM is -1.0 at typing. Meanwhile, the IR contracts run unchanged to 4 ticks lower through the reds.

• Post-RBA gyrations will come under the microscope today, after 3-Year ACGB yields broke and closed above the psychological 3.00% level for the first time in this cycle.
• As we have noted elsewhere, market pricing remains extreme vs. the reference points that the RBA provided yesterday (the Bank’s new economic forecasts are based on a year-end cash rate of 1.50 -1.75%, with eyes on a more “normal” interest rate of ~2.5%), ratcheting higher after yesterday’s decision, with no real receive side interest identified yet and a lack of a clear trigger to facilitate such interest. The RBA’s new, eye-watering inflation expectations will likely prolong this trend.
• Monthly retail sales data headlines the domestic docket today, with the potential for the latest NZ labour market report to provide some trans-Tasman impetus.