AUSSIE BONDS: Sharply Richer After Today's Data Drop

At the Tokyo lunch break, JGB futures are little changed, +1 compared to the settlement levels.

• March preliminary industrial production was below market forecasts, down 1.1%m/m, versus -0.4% expected. In y/y terms, we came in at -0.3% versus 0.8% forecast (0.1% was the prior outcome). The y/y trend hasn't been able to see much upside traction for a number of years now. The current y/y pace is slightly above averages for 2023/24, but only marginally.
• Retail sales were slightly below market forecasts. We were -1.2%m/m, against a 0.7% forecast, with Feb revised to a 0.4% gain. In y/y terms, we rose 3.1%, against a 3.5% forecast and 1.3% in Feb. The y/y trend is around mid-range of the past 12 months, as we have oscillated between flat to +5%. The authorities remain focused on driving sustained/positive real household spending growth, aided by positive real wages growth. The next round of labour earnings data is due next Friday.
• Cash US tsys are slightly mixed, with a flattening bias, in today's Asia-Pac session after yesterday's modest rally.
• Cash JGBs are mixed, with benchmark yields 1bp lower (5-year) to 1bp higher (30-year). The benchmark 10-year yield is 0.3bp higher at 1.321% versus the cycle high of 1.596%.
• Swap rates are 1-2bps lower. Swap spreads are mixed.

Monthly trimmed mean and headline data for March were unchanged from February at 2.7% y/y and 2.4% respectively. The latter was higher-than-forecast. The trimmed mean has been around 2.7% for four consecutive months now, which is consistent with the RBA’s projection that it could remain around this rate and not make any further progress towards the 2.5%-target mid-point in 2025. Given global developments though, the outlook remains highly uncertain.

Australia CPI trimmed mean vs services y/y%

• March seasonally adjusted headline CPI rose 0.5% m/m to be steady at 2.4% y/y, while excluding volatile items & holiday travel also rose 0.5% m/m but eased 0.1pp to 2.6% y/y, also close to the mid-point of the 2-3% target band. However, 3-month annualised momentum has picked up to 4.0% for both.

Australia CPI headline vs ex volatile items 3-mth annualised momentum % sa

Source: MNI - Market News/ABS

• March services inflation rose to 3.9% y/y from 3.6%, while non-tradeables were steady at 3.2%. Goods moderated 0.2pp to 1.1% y/y, lowest since November, and tradeables were unchanged at 0.9%.
• The ABS observes that food & non-alcoholic beverages (+3.4%), alcohol & tobacco (+6.7%) and housing (+1.8%) made the largest contributions to annual headline inflation in March.