US TSYS: Tsys Yields Richer, 10yr Makes New YTD Lows
Feb-28 00:48
- Tsys futures are trading higher in early morning trading, with most contracts trading above Thursday's highs. TU is +02¾ at 103-12⅞, while TY is +10+ at 110-31
- A bullish cycle in Treasury futures remains in play. The TY contract has pierced resistance at 110-20, the 76.4% retracement of the Dec 3 - Jan 13 bear leg. A clear break of this level would broaden the bullish recovery and signal scope for a climb towards the 111-00 handle, ahead of 111-22+, the Dec 3 high and a key resistance. Initial firm support to monitor is 109-13, the 50-day EMA. Clearance of this level would highlight a potential reversal.
- Cash tsys have opened 1-2.5bps richer, with the belly of the curve outperforming. The 10yr is -1.9bps at 4.241% and now trades at new YTD lows.
- Trump announced the resumption of trade negotiations with the UK during a joint press conference with British PM Keir Starmer, hinting at a swift deal to shield the UK from his proposed tariffs. The talks, which aim to forge a robust trade agreement, come as a relief to Starmer, who is navigating economic challenges and seeking to balance relations with both the US and the EU, while also addressing a potential Ukraine peace deal. Though details remain vague, Trump expressed optimism about reaching an agreement soon.
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AUSSIE BONDS: Richer After Q4 CPI Lower Than Expected
Jan-29 00:43
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.
AUSTRALIA DATA: A$ & Local Yields Softer Post Q4 CPI Miss
Jan-29 00:35
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.
AUSTRALIA DATA: Underlying CPI Inflation Moderates Slightly More Than Expected
Jan-29 00:33
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.
