AUSSIE BONDS: Subdue Session, Light Local Calendar Next Week

• The S&P 500 Growth Index, up 40.50% y/y continues to outperform the Value Index, up 14.95% y/y. Growth has now outperformed by 25.5% over the past year, reaching the largest gap overnight.
• The S&P 500 has returned 26.85% for the year, while the NASDAQ is 30.76% for the year.

Chart. S&P 500 Growth vs Value

Oil prices are little changed today ahead of the Fed decision and are holding onto this week’s losses driven by soft China data and weaker risk appetite. They have found some support from an earlier reported US inventory drawdown. WTI is up 0.1% to $70.13/bbl after a low of $70.05 and a high of $70.34. Brent is slightly higher at $73.23 following a peak of $73.43. The USD index is flat.

• With attention on the supply side, Bloomberg reported that there was a US crude inventory drawdown of 4.7 million barrels last week, larger than expected, according to people familiar with the API data. Product stocks continued to rise though with gasoline 2.4mn barrels higher and distillate +744k. The official EIA data is out later today. 
• Sanctions are tightening on Russian crude exports with the EU adding over 50 ships to its blacklist and now the UK has announced measures aimed at key players in Russia’s oil industry and also its shadow fleet. The US is also looking to lower its price cap.
• The effect of the incoming Trump administration on oil prices remains unclear with increased US supply likely but also increased sanctions on Iran reducing its ability to export. The uncertainty is contributing to crude’s current range trading, according to Westpac.
• Later the Fed decision is announced and a 25bp rate cut is widely expected (see MNI Fed Preview). There are also US November housing starts/building permits and Q3 current account data, as well as UK November CPI/PPI. The ECB’s Lane speaks. 

ACGBs (YM +1.0 & XM +1.0) are slightly richer after the release of the Federal Government’s MYEFO.

• There are few changes to the economic forecasts with them focused on the current financial year reflecting actual data outcomes. The deficit in FY25 has been revised slightly lower but remains at 1% of GDP. However, the subsequent years are showing a worse deficit trajectory and as a result higher debt ratios.
• From FY26 the deficit is now forecast to be larger. FY26 has been revised up 0.1pp to 1.6% of GDP, FY27 0.4pp to 1.3% and FY28 0.2pp to 1.0%. This is predominantly due to policy decisions with them accounting for around 80% of the aggregate $21.7bn deterioration in the budget to FY28.
• The headline inflation outlook is unchanged at 2.75% in FY25 and FY26 but wage increases have been revised lower.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session ahead of today's FOMC policy decision.
• Cash ACGBs are 1-3bps richer with the 3/10 curve steeper and the AU-US 10-year yield differential at -10bps.
• The bills strip is slightly richer, with pricing +1 to +3.
• RBA-dated OIS pricing shows a 25bp rate cut more than fully priced by April (118%).
• Tomorrow, the local calendar will see Consumer Inflation Expectations data.