Yields Shunt Higher After Much Stronger Than Expected Jobs Report

ACGBs (YM -4.0 & XM -3.5) are 7-8bps cheaper after February’s Employment Reports printed way stronger than expectations: Total Employment change 116.5k (+40k est & +15.3k prior), Full-Time Employment change +78.2k (19.9k revised prior), Part-Time Employment change +38.3k (-4.6k revised prior) and the Unemployment Rate falls to 3.7% (4.0% est and 4.1% prior).

• February labour market data were expected to bounce given the ABS warned that data had been weak due to people taking time off between jobs over the holidays. But that bounce was a lot sharper than expected signalling that the labour market remains very tight.
• Given the noise, more months of labour data are needed to determine how tight market is easing plus it is also worth looking at averages.
• Cash ACGBs are 3-5bps cheaper after being 3-4bps richer earlier in the Sydney session. The AU-US 10-year yield differential is 5bps higher at -18bps after being at -25bps earlier.
• Swap rates are 5-6bps higher.
• The bills strip is cheaper, with pricing -3 to -6.
• RBA-dated OIS pricing is 6-9bps firmer for meetings beyond August. A cumulative 33bps of easing is priced by year-end versus 42bps before the release.
• Tomorrow, the local calendar will see the publication of the RBA Financial Stability Review.