Twist Steepening As Retail Sales Bounce Fades

YM finished +1.0, while XM was -1.5. Cash ACGBs saw 1bp richening to 3bp of cheapening as the curve twist steepened, pivoting around 5s.

• Aussie bonds firmed in the wake of a much softer than expected outcome for domestic retail sales data, with the Black Friday impact continuing to distort the data at this time of year, while an upward revision to the November reading provided further downward pressure to the December outcome.
• A reminder that the health of the consumer is a focal point for the RBA as the lagged impacts of monetary tightening take hold.
• Bills were 1-4bp richer through the reds at the bell, bull steepening, with RBA dated OIS showing 23bp of tightening for next week’s meeting alongside a terminal cash rate of ~3.70% (the latter came in by ~10bp post-retail sales).
• The space then pulled away from best levels ahead of official Chinese PMI data, which saw the country’s well-documented move away from ZCS and the LNY holiday period combine to provide a much firmer than expected outcome for the non-manufacturing PMI print.
• A late downtick was then observed, probably aided by reports of the scheduling of a telephone call between the Australian & Chinese trade ministers (seemingly for some point next week), as Sino-Aussie relations continue to thaw.
• On the semi-issuance front, A$1.5bn of QTC’s new 4.50% Aug-35 bond was priced.
• Looking ahead, Wednesday will see the finial Judo Bank m’fing PMI print & CoreLogic house price readings, along with A$700mn of ACGB May-34 supply.