AUSSIE BONDS: Richer But Cheaper Than Pre-CPI, Full Hike Priced For End-2026

Aussie 3yr (YM) bond futures underperformed, last 96.545, off 3.5bps. 10yr futures were up a touch to 95.815. The bias in US Tsy futures has been to nudge higher, support the Aussie 10yr but the 3yr is likely reflecting near term uncertainties around the RBA outlook, with tomorrow's Q3 CPI print in focus. ACGB yields are mixed, as the curve flattens, the front end 3yr establishing itself back above 3.40% (last 3.44%), while the 10yr has drifted lower to 4.165%. This leaves the 3/10s curve at +72bps, flatter by 5bps. 

• The AU-US 10yr spread is near +19bps, so back towards the upper ends of its recent range. We see spread compression trades re-emerge above +30bps, but a lot depends on tomorrow's Australian Q3 CPI print.
• Key watch points for CPI tomorrow are as follows: Bloomberg consensus expects trimmed mean to print at 0.8% q/q & 2.7% y/y, which would see a pickup in the 2q/2q annualised rate to 2.8% from 2.6%. This outcome could argue for a hold or a cut dependent on the revised outlook and services inflation result. This week Bullock reiterated that labour data are volatile and while the 0.2pp rise in the September unemployment rate to 4.5% was surprising, it could fall again in October. Thus she would like more information.
• Market pricing has around 10bps of easing priced in for Nov, we were around 16bps at the end of last week. A full cut is priced by the Feb meeting next year. 

Gold range traded during today’s APAC session with breaks above $4000 continuing to be temporary. Prices have just dipped and are down 0.3% to $3970.0 after a high of $4019.68 and intraday low at $3964.01. It found some support from the weaker US dollar (BBDXY -0.2%) while US yields are steady. There was little news to drive safe-haven flows in either direction ahead of Wednesday’s Fed decision.

• Gold has held above support at $3944.9, 9 October low, but remains well below initial resistance at $4186.4, 17 October low. Bullion continues to be in overbought territory despite the recent correction.
• Central bank buying, especially from the PBoC, has provided medium-term support to gold prices and this is generally expected to continue. In line with this, the Bank of Korea said today that it is considering extra purchases for its reserves over the medium- to long-term which would be the first time in 10 years.
• Silver is down 0.3% to $46.68 and has also been in a narrow range between $46.620 and $47.227, below initial support at $47.55, 22 October low. The trend also remains overbought and the current decline is seen as corrective.
• Equities are mixed with the S&P e-mini flat, KOSPI down 1.2% but CSI 300 up 0.2%. Oil prices are lower with WTI -0.2% to $61.16/bbl. Copper is down 0.6%.
• Later August US S&P Cotality & FHFA house prices, October Richmond & Dallas Fed indices and October Conference Board consumer confidence as well as German November GfK consumer confidence and ECB bank lending survey are released. 

Despite weakness across major equity bourses, US bond futures didn't see a lead in with TYZ5 posting only modest gains.  Up +02 at 113-15+ the the 10-Yr price action was muted as volumes remained modest throughout the trading day.  

Cash volumes were light also, capping yield moves.  

• The US 2-Yr is 3.499% (+0.4bp)
• The US 5-Yr is 3.607% (+0.3bp)
• The US 10-Yr is 3.979% (-0.4bps) as it consolidates below the 4.00% recent range bottom.
• The US 30-Yr is 4.551% (-0.3bp)

Focus for markets tonight will be US$69bn 2-Yr auction, US$70bn 5-Yr auction and various bill auctions. 

Economic Data focus is on :

10/28/2025 9:00 FHFA House Price Index MoM (-0.1%, -0.1%)

10/28/2025 9:00 S&P Cotality CS 20-City MoM (-0.07%, -0.10%), YoY (1.82%, 1.40%)

10/28/2025 10:00 Richmond Fed Mfg Index (-17, -10)

10/28/2025 10:00 Conf. Board Consumer Confidence (94.2, 93.4)

10/28/2025 10:30 Dallas Fed Services Activity (-5.6, --)