AUSSIE BONDS: Cheaper Ahead Of Next Week's RBA Gov. Testimony & CPI Data
ACGBs (YM -5.0 & XM -6.0) are cheaper and at/near session cheaps on a data-light day.
- Cash US tsys are flat to 2bps cheaper, with a steepening bias, in today’s Asia-Pac session.
- Cash ACGBs are 5-6bps cheaper with the AU-US 10-year yield differential at +13bps.
- The bills strip bear-steepened, with pricing -2 to -6.
- MNI POLICY: RBA Sees Risk That NAIRU Slightly Lower Than 4.5%. Internal analysis of recent economic data suggests the non-accelerating inflation rate of unemployment (NAIRU) may be 10-20 basis points below the Reserve Bank of Australia's 4.5% estimate, which is based on model outputs likely distorted by the pandemic years, MNI understands. Former staffers have called on the RBA to revise its NAIRU estimate lower for some time.
- RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in September is given a 7% probability, with a cumulative 29bps of easing priced by year-end.
- On Monday, the local calendar will see RBA Governor Bullock appearing before the House of Representatives Standing Committee on Economics. August CPI data is due on Wednesday.
- Next week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond on Tuesday, A$1000mn of the 3.00% 21 November 2033 bond on Wednesday and A$900mn of the 2.75% 21 November 2029 bond on Friday.
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BUND TECHS: (U5) Bear Threat Still Present
- RES 4: 130.26 High Aug 8
- RES 3: 129.89/130.06 50-day EMA / High Aug 14
- RES 2: 129.58 20-day EMA
- RES 1: 129.18 High Aug 18
- PRICE: 129.10 @ 05:42 BST Aug 20
- SUP 1: 128.64 Low Aug 15
- SUP 2: 128.40 Low Apr 9
- SUP 3: 128.19 Low Mar 27 (cont)
- SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)
A bear threat in Bund futures remains present. The contract traded sharply lower Friday resulting in a breach of 128.84, the Jul 25 low and bear trigger. Note that the 129.00 handle marks the base of a broad range and a clear range breakout would strengthen a bearish threat. This would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.89, is required to signal a reversal. Resistance at the 20-day EMA is at 129.58.
GOLD: Gold Holds Losses, Fed Speakers & Minutes Later
Gold has been range trading today falling to $3311.6/oz before rising to $3319.59. It is currently 0.1% higher around $3318.8 holding onto Tuesday’s losses driven by steps taken towards a Ukraine truce. With markets hoping Fed Chair Powell will reveal his thinking for the September 17 decision on Friday, they are moving in narrow ranges. US yields are little changed and the USD index is 0.1% higher.
- Silver is down 0.5% to $37.212 off the intraday low of $37.170. A clear break of the 50-day EMA at $37.077 is needed to strengthen the short-term bearish threat. Initial resistance is at $39.655.
- Equities are also generally weaker with the Nikkei down 1.7%, Hang Seng -0.6% and S&P e-mini -0.3%. Oil prices are moderately higher with WTI +0.4% to $61.99/bbl. Copper is up slightly.
- Later the Fed’s Waller and Bostic appear and the July FOMC meeting minutes are published. UK July CPI & PPI, euro area July CPI and German July PPI print. ECB President Lagarde appears on a panel.
STIR: RBNZ-Dated OIS Shunt Softer After RBNZ Decision
RBNZ dated OIS pricing closed 14-23bps softer for meetings beyond August following today’s RBNZ Policy Decision.
- The market had priced 22bps of today’s 25bp cut going into the decision.
- 35bps of cumulative easing is now priced by November 2025 versus 12bps before the decision.
Figure 1: RBNZ Dated OIS Post-RBNZ vs. Pre-RBNZ (%)
Source: Bloomberg Finance LP / MNI
