YM At The Fore Into CPI

Twist flattening on the U.S. Tsy curve drove matters in post-Sydney dealing, leaving YM -2.5 and XM +1.0 come the bell.

• The pre-CPI weakness in the former extended after Monday's dip saw the open interest in the contract fall to ~709K from ~724K. This builds on the recent reduction in longs that we have pointed to through assessing a combination of open interest data and price dynamics. To recap, OI in YM stood at ~800K around about a month ago, dipped and then recovered, before topping out at 777K a week or so ago (when traders looked to the implied 1.00% yield level in the contract as support). The contract is now testing the key 1.00% implied level yet again. A reminder that last week saw a break of that level to a low of 98.895, before RBA intervention in the form of repo rate tweaks and direct purchases of ACGB Apr-24 for the first time since Feb provided support.
• The aforementioned CPI data headlines the local docket today. The BBG survey looks for +3.1% Y/Y when it comes to headline CPI in Q3, vs. the +3.8% seen in Q2, while the trimmed mean measure is seen at +1.8%, vs. +1.6% in Q2. Anything in the way of a meaningful beat would no doubt see participants look to once again test the RBA's resolve when it comes to its YCT mechanism. Meanwhile, a miss may result in an unwind of some of the recent hawkish recalibration in market pricing when it comes to RBA rate hikes (which has arguably been driven more by global than domestic factors).