Winding Into The Weekend

Aussie bonds meandered through the final session of the week, initially showing lower as Sydney reacted to the hawkish ECB rhetoric that accompanied Thursday’s monetary policy decision, before pulling back from worst levels after both YM & XM failed to breach their overnight lows (XM didn’t get anywhere near testing post-Sydney session cheaps), with a lack of meaningful headline catalysts evident in onshore hours. That left YM +1.4 at the bell, while XM was +0.3. Cash ACGBs were flat to 4bp richer, with the 7- to 12-Year zone lagging the wider bid as 10s failed to widen further vs. their U.S. counterpart, as the 0bp zone limited the recent move in that spread.

• Bills were flat to -4 through the reds, with RBA dated OIS little changed on the day.
• The latest round of domestic flash PMI readings saw a slower rate of expansion for the manufacturing sector and a sharper rate of contraction in both the services and composite readings. Survey sponsor Judo Bank noted that "what we are seeing could be the first signs of a desired soft landing for the Australian economy in 2023.”
• Next week’s local docket thins out ahead of the Christmas break, with the minutes from the latest RBA decision and latest Westpac leading index print providing the only real points of note.