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Two-Way On Regional CPI, RBA Dated OIS Pushes Firmer In Lieu Of Local Prints

AUSSIE BONDS

Early Sydney trade was two-way, with the early richening inspired by an overnight bid in core global FI markets and NZ CPI data that was a little softer than the RBNZ expected.

  • Firmer than expected (vs. newswire surveys) domestic CPI data then applied notable pressure, leaving YM -9.0 & XM -4.0 at the close, a touch above their respective session lows. The major cash ACGBs finished 2-10bp cheaper as the wider curve bear flattened. ACGB widened vs. global peers post-CPI.
  • The headline CPI metric was a touch below the RBA’s forecast +8% Y/Y, although the trimmed mean metric topped the Bank’s +6.5% Y/Y forecast. Inflation continues to run at particularly elevated levels for this stage in the RBA hiking cycle.
  • Bills finished 13-19bp cheaper through the reds, in what was a volatile day for Aussie STIRs. RBA dated OIS now shows ~23bp of tightening for next month’s meeting, almost fully pricing a 25bp hike post-CPI. Meanwhile, terminal cash rate pricing is showing just above 3.75% late in the day after printing below 3.50% in the wake of the NZ CPI release (see chart below for a visual on intraday swings). There hasn’t been any meaningful RBA call changes from the sell-side post CPI.
  • Australian markets are closed on Thursday as the country observes the Australia Day holiday.

Fig. 1: Intraday Moves In RBA Dated OIS

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Early Sydney trade was two-way, with the early richening inspired by an overnight bid in core global FI markets and NZ CPI data that was a little softer than the RBNZ expected.

  • Firmer than expected (vs. newswire surveys) domestic CPI data then applied notable pressure, leaving YM -9.0 & XM -4.0 at the close, a touch above their respective session lows. The major cash ACGBs finished 2-10bp cheaper as the wider curve bear flattened. ACGB widened vs. global peers post-CPI.
  • The headline CPI metric was a touch below the RBA’s forecast +8% Y/Y, although the trimmed mean metric topped the Bank’s +6.5% Y/Y forecast. Inflation continues to run at particularly elevated levels for this stage in the RBA hiking cycle.
  • Bills finished 13-19bp cheaper through the reds, in what was a volatile day for Aussie STIRs. RBA dated OIS now shows ~23bp of tightening for next month’s meeting, almost fully pricing a 25bp hike post-CPI. Meanwhile, terminal cash rate pricing is showing just above 3.75% late in the day after printing below 3.50% in the wake of the NZ CPI release (see chart below for a visual on intraday swings). There hasn’t been any meaningful RBA call changes from the sell-side post CPI.
  • Australian markets are closed on Thursday as the country observes the Australia Day holiday.

Fig. 1: Intraday Moves In RBA Dated OIS

Keep reading...Show less