U.S. Tsy Lead Pushes Yields higher

Bond futures are sharply lower this morning (but off NY session lows) with YM -9.0 and XM -7.5 following the lead set by U.S.Tsys, which reacted negatively to a more limited moderation in annual inflation (relative to expectations) and hawkish Fedspeak. Cash ACGBs see a rise of 7-8bp along the curve out to the 12-year zone. 15 to 30-year are 4-5bp higher in yield.

• The 3/10 cash curve is 1bp flatter at ~ 28bp, only 3bp above the cycle low of just below 25bp set in Aug-22.
• AU-US 10-year yield differential is little changed at ~6bp.
• Swap rates also higher by ~5bp with the curve basically flat and swap spreads a little narrower.
• Bills are weaker across the strip with June bills -7.0 and the reds -10.0/-11.0.
• Immediate RBA-dated OIS is little changed, attaching a 92% chance of a 25bp hike from the RBA at the March meeting. Terminal rate expectations however have reacted to the U.S. inputs and are 4bp higher at 4.19% for Sep/Oct-23, just below this week’s intraday high of 4.22%.
• Outside of the U.S.-derived impetus attention will turn to RBA Governor Lowe’s parliamentary testimony, while we will also get A$700mn of ACGB Apr-33 supply.