Treads Water Ahead Of Q1 CPI On Wednesday

ACGBs sit little changed (YM -1.0 and XM flat) at or near bests after trading in a narrow range in the Sydney session. With local news flow light ahead of tomorrow’s ANZAC Day holiday, ACGBs have been willing to be guided by US Tsys. US Tsys are marginally richer in Asia-Pac trade.

• Cash ACGBs are flat to 1bp cheaper with the AU-US 10-year yield differential -4bp at -10bp.
• Swap rates are 1bp lower with EFPs 2bp tighter.
• Bills strip is steeper with pricing flat to -4.
• Q1 CPI data is scheduled for release on Wednesday and is expected to confirm that inflation peaked at the end of 2022. According to BBG consensus, annual headline inflation is expected to slow to +6.9% from 7.8% in Q4. Trimmed Mean CPI is expected to print +1.4% Q/Q and +6.7% Y/Y versus +1.7% and +6.9%.
• According to market pricing, however, the deceleration in underlying inflation may not be enough to keep the RBA on hold with a cumulative 22bp of tightening priced by August.
• ACGB futures will trade normal SYCOM hours on either side of tomorrow’s holiday and be guided by a raft of second-tier releases with the Chicago & Dallas Feds, S&P/CS House Prices Index and New Home Sales as the highlights.