AUSSIE BONDS: Cheaper, More Cost-Of-Living Relief Coming, Awaiting US PPI & Retail Sales Data

ACGBs (YM -1.0 & XM -1.0) are holding slightly cheaper after dealing in relatively narrow ranges in today’s Sydney session. There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Consumer and Business Confidence data.

• Cash US tsy yields are dealing little changed across benchmarks in today’s Asia-Pac session, with news flow light, ahead of US CPI data out later today.
• January’s US CPI report is forecast to show the first reading below 3% for annual inflation since March 2021, increasing optimism that the Federal Reserve will be able to start loosening monetary policy this year. See MNI US CPI Preview: Used Cars Drag Seen Clashing With Firmer Non-Housing Services (link)
• Cash ACGBs are 1bp cheaper, with the AU-US 10-year yield differential 1bp wider at -1bp.
• Swap rates are 1bp higher.
• The bills strip is slightly cheaper, with pricing +1 to -2.
• RBA-dated OIS pricing is 2bps firmer for meetings beyond September. A cumulative 36bps of easing is priced by year-end.
• Tomorrow, the local calendar is empty, apart from the AOFM’s planned A$800mn sale of the 1% December 2030 bond.

TYH4 is currently trading at 110-20, - 03 from New York closing levels.

Treasuries are trading in a very small range during the Asia session, volumes have remained low, ahead of US CPI later today.

• Treasuries futures have traded rangebound today, hitting a low of 110-19+ and a high of 110-23+, and currently trading at 110-20, volatility is expected to remain low heading into the US session.
• Taking a look at the technical levels ahead of US CPI later today - Mar'24 10Y future levels to watch on the downside are 110-16 Dec 13 & Feb 9 lows, a break of 109-31+ the Dec 11 lows, would opens a bigger move down to 109-17, 50.0% of the Oct 19 - Dec 27 bull phase. To the upside a break above 111-09 the 20-day EMA, opens up a move to the Feb 1 highs of 113-06+, which could then put in play the 113-12 the Dec 12 high and bull trigger.
• Cash yields have done little today, the curve is unchanged to 0.3bps wider. The 10yr sits at 4.181% challenging last week's highs, but has yet to make any material test on the key 4.20%, a break above 4.20% post CPI could open up a move to the Dec 12 highs of 4.28%.
• MNI US CPI Preview: Used Cars Drag Seen Clashing With Firmer Non-Housing Services ( https://roar-assets-auto.rbl.ms/files/59940/USCPIPrevFeb2024.pdf )

NZGBs closed at or near the session’s best levels, with benchmark yields flat to 1bp lower, after the RBNZ’s measures of business inflation expectations eased in Q1. The 2-year ahead is now at the mid-point of the target band at 2.5% down from 2.8% in Q4 and the 1-year ahead is close to the top of the band at 3.2% down from 3.6%, but both are above the RBNZ’s CPI forecasts.

• The RBNZ also monitors household inflation expectations which are released on February 22. The RBNZ Policy Decision is on 28 February.
• Cash US tsy yields are dealing little changed across benchmarks in today’s Asia-Pac session, with news flow light.
• The swap curve has twist-steepened, with rates 5bps lower to 4bps higher.
• RBNZ dated OIS pricing is 3-6bps softer across meetings today. A cumulative easing of 50bps is priced for year-end from a peak of 5.62%. This compares to 100bps of easing off 5.53% at the end of January.
• Tomorrow, the local calendar sees REINZ House Sales, Card Spending and Food Prices data.