AUSSIE BONDS: Richer But Way Off Bests, Focus Turns To US Labour Market Data
ACGBs (YM +2.0 & XM +2.5) are richer but well off the Sydney session’s best levels.
- Outside of the previously outlined household spending and trade balance data, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s data-induced rally. The US calendar today will see Challenger Job Cuts, Trade Balance and Jobless Claims data. Fed's Barkin will also speak on the economic outlook.
- Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +5bps.
- Swap rates are 2-3bps lower.
- The bills strip has twist-flattened, with pricing -1 to +3.
- RBA-dated OIS pricing is 1-3bps softer across 2025 meetings. A 25bp rate cut is still not fully priced until May. Notably, market expectations for the May meeting have softened by around 25bps over the past two weeks.
- Tomorrow, the local calendar will see Foreign Reserves data alongside AOFM’s planned sale of A$800mn of the 3.75% 21 April 2037 bond.
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US TSYS: Cash Yields Up as Futures Steady in Asia Trading.
- With the election drawing closer and the uncertainty over the result greater, the move lower in yield stalled in Asian trading with yields across the curve higher.
- Cash markets were weaker throughout the Asia trading day with the 2YR +0.4bp to 4.168, 10YR +1bp to 4.295 and the 30yr +1bp to 4.479.
- The Dec’24 10Y futures traded in a very tight range, oscillating around 110-14 with little movement and low volumes.
- Tonight’s data sees the release of the S&P Global US Services PMI, ISM Services Index / Prices Paid / Employment and New Orders and Mortgage Applications.
RBA: Another Hawkish Hold, Board Remains “Vigilant” To Upside Inflation Risks
The RBA left rates at 4.35% in November as was unanimously expected. The tone of the statement and guidance paragraphs was little changed and suggested another hawkish hold. The Board remains “vigilant to upside risks to inflation” and didn’t rule “anything in or out”. It is still going to be “some time yet before inflation is sustainably in the target range”. Thus, Governor Bullock will probably reiterate at the 1530 AEST press conference that rate cuts are unlikely in the “near term”.
- The statement was updated for the new data released since the last meeting on September 24. This included a couple of mildly hawkish additions – that some labour market indicators had “recently stabilised” and there is “tentative evidence of an increase in spending” in Q3 as income growth rises.
- The RBA notes that the November forecasts are “very similar” to August’s. The revisions to the trimmed mean profile were only by 0.1pp, but it meant that it should be at the top of the 2-3% band in Q2 2025 rather than Q4 but the mid-point will still be Q4 2026, which is what the RBA highlights in the statement.
- Despite recent revisions, demand continues to exceed supply. Growth was revised down across the forecast horizon. Household consumption growth was revised lower near term but was then little changed. Public demand was revised down in H2 2024 but up from 2025 and 2026. A federal election is due by mid-May 2025.
- Given that easing of the labour market appears to have “stabilised”, employment growth was revised higher for Q4 2024 and Q2 2025 but the unemployment rate was unchanged. Wages were revised down across the forecast period.
- Productivity growth remains a problem and was revised lower across forecasts.
ASIA STOCKS: Some Inflows Return Following Consistent Outflows.
- Some signs of positivity yesterday in terms of Asian equity flows. South Korea saw +$261 of inflows following four successive days of outflows. Indonesia, Thailand , Malaysia all turned positive after successive days of outflows but for the Philippines outflows continued.
• South Korea: Recorded inflows of +$261m yesterday, bringing the 5-day total to -$689m. YTD flows remain positive at +$7.365b. The 5-day average is -$138m, the 20-day average of -$152m and the 100-day average of -$66m.
• Taiwan: Experienced outflows of -$230m yesterday, totaling -$1,644m over the past 5 days. YTD flows are negative at -$11,789b. The 5-day average is -$329m, worse than the 20-day average of +$21m and the 100-day average of -$139m.
• Indonesia: Posted inflows of +$17m yesterday, bringing the 5-day total to -$136m. YTD flows remain positive at +$2.540b. The 5-day average is -$27m, in line with the 20-day average with the 100-day average of +$32m.
• Thailand: Recorded inflows of +$1m yesterday, totaling -$261m over the past 5 days. YTD flows are negative at -$3.497b. The 5-day average is -$52m, the 20-day average is -$31m and the 100-day average of -$10m.
• Malaysia: Posted inflows of +$37m yesterday, contributing to a 5-day outflow of -$194m. YTD flows stand at +$414m. The 5-day average is -$39m, worse than the 20-day average of -$10m with the 100-day average +$6m.
• Philippines: Saw outflows of -$13m yesterday, with net outflows of -$63m over the past 5 days. YTD flows are positive at +$31m. The 5-day average is -$13m, worse than the 20-day average of -$1m and the 100-day average of +$5m.
