JGBS: Futures Gap Higher On Lower Than Expected Tokyo CPI

ACGBs (YM +6.0 & XM +4.5) are sharply higher after Q4 CPI data came in slightly below expectations across most metrics:

• Trimmed Mean CPI rose 0.5% q/q (vs. est. +0.6%) and 3.2% y/y (vs. est. +3.3%).
• Weighted Median CPI increased 0.5% q/q (vs. est. +0.6%) and 3.4% y/y (vs. est. +3.5%).
• Headline Consumer Prices rose 0.2% q/q (vs. est. +0.3%) and 2.4% y/y (vs. est. +2.5%).
• December's annual headline CPI matched estimates at +2.5% y/y.
• “The trimmed mean excluded price falls in both Electricity and Automotive fuel this quarter, alongside other large price rises and falls.” (ABS)
• Cash ACGBs are 4-6bps richer after the data with the AU-US 10-year yield differential at -15bps versus -10bps pre-data.
• Swap rates are 5-7bps lower, with the 3s10s curve steeper.
• The bills strip is richer, with pricing +4 to +7.
• RBA-dated OIS pricing is 3-7bps softer across meetings after the data. A 25bp rate cut is more than fully priced for April (136%), with the probability of a February cut at 89% (based on an effective cash rate of 4.34%). February was at 76% before the data. 

The A$ is weaker in the aftermath of the Q4 CPI print. We are back around 0.6225/30, off close to 0.40%. Jan 21 lows at 0.6209 will be in focus on a further pull back. In the bond futures space, ym +7 xm +5, slightly off best levels. OIS is 3 to 7bps softer across RBA meeting dates. 

• Q4 CPI was weaker than forecast across both headline and trimmed mean. More details to follow. 

Q4 trimmed mean CPI rose 0.5% q/q and 3.2% y/y, while headline was +0.2% q/q & 2.4% - both moderated more than expected. The December measures posted increases of 2.7% y/y and 2.5% respectively. More details to follow. See ABS press release here.