Trading On Wider Core FI Moves

Bond futures are marginally above pre-RBA SoMP levels, but are trading largely on U.S. Tsy gyrations, with most of the newswire headlines surrounding the SoMP already fleshed out by Governor Lowe & the RBA’s post-meeting statement earlier this week.

• The Bank’s major CPI forecasts and assumptions surrounding the cash rate profile were already known. The RBA has also provided the usual scenario analysis surrounding the major economic variables in the full statement, but we wouldn’t expect this to offer much for the market to trade off given the divergence between the market and Bank expectations in recent times.
• The board wrapped up the SoMP by reaffirming that it “is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. This will require a further lift in interest rates over the period ahead. The Board will continue to closely monitor the incoming information and evolving balance of risks as it assesses the timing and extent of future interest rate increases.” There was little apparent in terms of wider discussion surrounding neutral levels of the cash rate within the major verses of the release.
• YM is -10.0, while XM is -12.5, a touch above worst levels of the session.
• Cash ACGB trade sees the 10-15-Year sector lead the weakness, with bear steepening in play.
• The 3-/10-Year EFP box has twist flattened.
• The IR strip runs 6-14bp cheaper through the reds.