AUSSIE BONDS: A Touch Cheaper
Jan-23 22:45
The bias in global core FI markets presented some cheapening pressure for Aussie bond futures in post-Sydney dealing, although XM once again outperformed its U.S. equivalent. The major contracts operate a little above their respective overnight bases, sticking to tight ranges in the early rounds of Sydney dealing as participants look ahead to this week’s key domestic event risk (Q4 CPI due Wednesday). YM is -3.0, while XM is -3.5. Meanwhile, cash ACGBs are 2.5-3.0bp cheaper across the curve.
- Bills run 1-2bp cheaper through the reds, while the major RBA dated OIS measures reside in familiar territory, pricing ~19bp of tightening for next month’s meeting, alongside a terminal cash rate pf 3.55-3.60%.
- All 3 of the major Judo Bank flash PMI readings for Jan resided in contractionary territory, with the collator noting that “Australia’s economy has started 2023 on a softer footing than what we experienced through much of 2022.”
- Meanwhile, the weekly ANZ-Roy Morgan consumer confidence print eased a little, pulling further below the 100 mark in the process.
- Looking ahead, the latest NAB business survey headlines the domestic docket today.
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US TSYS: Cash Treasuries Close Early With Further Sizeable Cheapening
Dec-23 19:10
- Cash Tsys hold onto further cheapening today at the early close, with yields 5-8.5bps higher on the day but just remaining off pre-U.Mich session highs across 2-10Y tenors.
- Those session highs were also month to date highs from 5Y tenors onwards, with the 2Y at highs since the Nov CPI miss on Dec 13 and the subsequent fall in terminal Fed pricing from close to 5% to ~4.9% currently.
- 2YY +5.0bps at 4.321%, 5YY +5.4bps at 3.857%, 10YY +6.9bps at 3.747% and 30YY +8.5bps at 3.823%.
- The first wave of US data were broadly as expected with core PCE inflation moderating and a small beat for income growth, before more mixed 1000ET data with new home sales surprisingly bouncing but importantly U.Mich inflation expectations being revised lower.
- Treasury futures are still set for a full session, with TYH3 currently trading 15 ticks lower at 113-02+ having earlier touched 112-31. In the process it cleared support at 113-09+ (Dec 21 low) to open the key short-term 112-11+ (Nov 21 low).
CANADA: GoC Yields Extend Session Highs
Dec-23 17:20
- Hard to see latest drivers but GoC yields across 2-10Y tenors, now up 12bps in the front-end to belly and 10bps for 10Y.
- Can-US yield differentials continue to narrow: 2Y at -39bps, 10Y -56bps, both close to highs since the BoC’s surprise Oct downshift.
- Move coincides with USDCAD stepping to new session lows to lows since Dec 15 at 1.3563. Support seen 1.3519 (Dec 14 low).
US TSYS: Re-Cheapening Ahead Of Early Cash Close
Dec-23 17:05
- Treasuries are seeing a re-cheapening of late, with yields back to 5-7bps higher on the day but remaining off pre U.Mich session highs.
- Those session (yield) highs were also month to date highs from 5Y tenors onwards, with the 2Y at highs since the Nov CPI miss on Dec 13 and the subsequent fall in terminal Fed pricing from close to 5% to ~4.9% currently.
- Only modest steepening on the day with 2s10s +1bp at -57.5bp, within the week’s range of -52 to -70bps.
- SIFMA recommends cash close at 1400ET.
