RBA: RBA - Labour Mkt Expected To Remain Tight - Jan Jobs Data Feb 19
Feb-12 05:17
RBA Hunter's speech today focuses on defining full employment. See the full speech at this link. Hunter stated: “ The recent acceleration of demand growth beyond our estimate of trend, at a time when the economy is already showing signs of being capacity constrained, means we expect the labour market will remain tight and inflation will remain above target for some time, as outlined in our recent Statement. Moving forward, we’ll be closely assessing capacity pressures in the economy and conditions in the labour market, and this will help us assess the extent to which the recent rise in inflation is temporary; and, in turn, inform our advice to the Monetary Policy Board about the outlook in inflation.”
- Earlier today, RBA Governor Bullock stated: "Our models' estimate of NAIRU have risen a bit, but we don't take a model approach only, we also use a bit of judgment," she said, noting the most recent set of forecasts showed how the Bank considered full employment." and "...has lifted its NAIRU estimate by around 10 basis points to 4.6%, Governor Michele Bullock told a Senate estimates hearing Thursday.
- The current unemployment rate is 4.1%. The next jobs print is due on Feb 19 (next Thursday).
- The labour market data will be important to gauge capacity constraints, but inflation will be the deciding factor around further RBA tightening. Governor Bullock is not committing to a pre-determined outlook, but given the starting point for headline/trimmed mean inflation, we are likely to need to see meaningful downside surprises to prevent further hikes.
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JGBS: Bear-Steeper Tied To Election Fears, 5Y Supply Tomorrow
Jan-13 05:15
JGB futures are weaker but above lows, -39 compared to settlement levels, as trading resumed after the long weekend.
- Cash US tsys are slightly cheaper in today's Asia-Pac session after yesterday's modest sell-off.
- Cash JGBs have bear-steepened across benchmarks, with yields flat to 5bps higher. Long-end yields are, however, off session highs.
- Longer-dated bond yields have been pressured by speculation that Prime Minister Sanae Takaichi might dissolve the parliament as soon as next month following local media reports.
- Consistent with today’s move, Bloomberg reported that “Japanese investors sold the most UK sovereign bonds in 14 years in November, with concern over Britain’s fiscal outlook and higher yields in the domestic market sapping demand for gilts.”
- Today's current move leaves the 2/10 curve at a fresh cycle, steepest since 2011 (see chart).
- Swap rates are mixed but little changed.
- Tomorrow, the local calendar will see Money Stock and Machine Tool Orders alongside 5-year supply.
Source: Bloomberg Finance LP
AUSSIE BONDS: Subdued Data-Light Session, Oct-36 Supply Tomorrow
Jan-13 04:54
ACGBs (YM -1.0 & XM -0.5) are slightly weaker after relatively subdued data-light session.
- Cash US tsys are slightly cheaper in today's Asia-Pac session after yesterday's modest sell-off.
- Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at +53bps. A simple regression of the 10-year yield differential against the AU–US 1-year forward 3-month (1Y3M) swap spread over the past two years suggests the current spread sits close to its regression-implied fair value.
- Today’s auction of the Jun-54 bond result extended the recent trend of firm pricing for ACGBs, with the weighted average yield printing 0.27bps through prevailing mids, according to Yieldbroker. However, demand weakened, as reflected by a cover ratio of 2.3433x, down from 3.4333x from the previous auction.
- The bills strip is flat to -2 across contracts.
- RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 31% for February to 94% by June and 141% by December 2026.
- Tomorrow, the local calendar will see Job Vacancies.
- The AOFM plans to sell A$1bn 4.25% 2036 bond tomorrow and A$700mn 3.25% 2029 bond on Friday.
COMMODITIES: WTI Fails Key Test as Markets Wait for Further Iran News
Jan-13 04:43
- Oil prices moderated Tuesday during the Asian trading day following on from three days of strong gains.
- WTI is lower by -0.24% at US$59.74 bbl, having failed in its test of $60 mid-morning. The 100-day EMA is above as the topside resistance at $60.13.
- Brent is down by -0.30% at US$64.08 bbl, after a mid morning high of $64.38.
- Protests in Iran have seen 648 people killed, a human rights group said on Monday. Human rights groups are warning an internet blackout that has lasted more than three-and-a-half days, is aimed at masking the extent of the bloodshed. This as the Iranian Foreign Minister Araghchi said that security forces have regained full control of the the country, with President Trump indicating that the US is weighing various options.
- "Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America," President Trump posts on Truth Social. (per BBG)
- Two of the world's largest oil traders are planning to move Venezuelan oil into storage in the Caribbean as a precursor to starting exports again, with BBG reporting that they are offering VZN oil to fuel makers in Texas and Louisiana already.
- BBG reported today that a research note from Goldman Sachs predict oil prices to bottom in Q4 this year with WTI reaching $52 bbl and Brent US$56 bbl.
