AUSSIE BONDS: Richer But Off Bests, RBA Decision On Tuesday With At 85% Priced

G10 FX trends have been quite muted in the first part of Wednesday trade. The USD BBDXY index was last near 1314 little changed for the session. 

• Aggregate G10 moves are not much beyond 0.10% at this stage, as the market awaits the key US CPI release later.
• USD/JPY is marginally lower, but is close to 157.70/75 in latest dealings. Headlines from BoJ Governor Ueda have crossed, reiterating that a decision on whether to raise rates will be made next week (so largely echoing Deputy Governor Himino's remarks from yesterday). Yen moved slightly firmer as Ueda spoke, presumably due to the fact he didn't pushback on Himino's remarks.
• US yields sit modestly lower, the 10yr back under 4.78%. Regional equity sentiment is mixed, while US futures are close to flat at this stage.
• EUR/USD is back under 1.0300 marginally. Headlines from ECB's Lane have crossed (speaking in HK). Economic growth is expected to recover further and if inflation stabilizes around 2% rates will go to neutral. 3% policy is not the lower bound Lane added (per BBG). FX sentiment hasn't shifted though.
• AUD/USD was weaker in earlier trade, but at 0.6190/95 has recovered some ground.
• NZD/USD is back around 0.5605/10, but short of Tuesday intra-session highs. We have seen another sharp rise in onshore NZGB yields today. Earlier data from the Westpac/McDermott Miller employment confidence index highlighted: "Employment confidence picked up by 2.4 points to 91.6 in the December quarter, led by an improvement in perceptions of job availability."
• Looking ahead, ahead of the US CPI print, we get UK inflation data. 

• Tsys yields are holding steady throughout the session curves are a touch flatter, the belly is outperforming with the 7yr  -1.6bps at 4.688%, the 2yr is -0.8bps at 4.358%, while the 10yr is trading -1.4bps at 4.778%
• Futures are steady with TY +01 at 107-12+. While the 2s10s curve is about 1bps lower at 41.327.
• Ranges have been narrow across all tenors ahead of CPI tonight. We have seen a 0.5-1bps cooling in rate cut expectations across the next few meetings

ACGBs (YM -2.0 & XM -2.0) are slightly cheaper after trading in a narrow range in today's data-light Sydney session.   

• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s directionless session. Focus turns to today’s CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December.
• Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at -15bps.
• Swap rates are 1-2bps higher.
• The bills strip -1 to -2 across contracts.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (102%) now, with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
• Tomorrow, the local calendar will see the December Employment Report. The market is expecting +15k jobs with the unemployment rate nudging higher from 3.9% to 4.0%.
• AOFM Bond issuance will issue A$700mn of the 2.75% 21 November 2027 bond on Friday.