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MNI: PBOC Net Drains CNY208.4 Bln via OMO Thursday

MNI: PBOC Sets Yuan Parity Higher At 7.1299 Thurs; +2.34% Y/Y

CHINA PBOC CONDUCTS CNY150.9 BILLION VIA 7-DAY REVERSE REPOS THURS

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MNI China Daily Summary: Wednesday, Aug 28

Flows Into Offshore Bonds Still Modest By Historical Standards, Hedging Costs Coming Down

Australia Q2 Total New Capital Expenditure -2.2%

EZ/UK Bond Supply Calendar: Slov Samurai Synd; IT, FI Thursday

UK: Week Ahead

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Morgan Stanley on BCCh: Risk of Sharper Hike On Table

CHILE
  • According to Morgan Stanley economists, higher-than-expected core inflation and still-strong growth should prompt the BCCh to keep the 125bp pace for the January 26 decision, with the risk of a sharper 150bp hike on the table.
  • This is in line with market pricing. A front-loaded pattern should remain with a 100bp hike in March, 50bp hike in May, and a final 25bp hike in June.
  • Although inflation continues to trend higher, the economy is set to shift into a lower gear throughout this year. As a result, inflation expectations should be close to peaking, and MS expect them start to adjust back toward the 3% y/y target as the growth slowdown settles in, a story which should begin in 2Q22.
  • Chile rates momentum has started to decelerate relative to US rates momentum as inflation expectations begin to settle in and as the market starts to price in a cutting cycle in Chile, while continuing to price in a rate-hiking cycle in the US.
  • In addition, a reduction in policy uncertainty from a more moderate cabinet in the incoming administration should also benefit local rates in the coming months.
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