Weakness Extends At The Close

Aussie bond futures extended on the cheapening witnessed in Friday’s overnight session as local participants reacted to Friday’s firmer than expected U.S. PPI data and looked ahead to a busy week on the macro front (headlined by U.S. CPI data and a raft of central bank decisions).

• The lack of meaningful headline flow and prevailing price action in U.S. Tsys on Friday meant that the ACGB space struggled to turn convincingly bid at any point, leaving YM -5.0 & XM -8.9 at the bell, after the contracts extended to fresh session lows in late Sydney dealing. Wider cash ACGB trade saw 4-10bp of cheapening as the curve bear steepened.
• Early widening in EFPs moderated a little as the day wore on.
• In terms of roll flow, 2/3 of volume in the YM roll observed since Friday’s close was lifted, while a little over 70% of the flow in the XM roll over the same horizon was given.
• Bills were 1-5bp cheaper through the reds, with light bear steepening apparent. RBA dated OIS was little changed to a touch firmer on the day, with ~16bp of tightening priced for the Feb ’23 meeting and a terminal cash rate of just over 3.60% eyed.
• Looking ahead, tomorrow’s local docket is headlined by CBA consumer spending readings, as well as the monthly Westpac consumer & NAB business surveys. We will also get A$150mn of Nov-27 I/L supply from the AOFM.