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Looking Through Chinese Data


Squeeze Continues


China Repo Rates Rise on Thursday

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AUSSIE BONDS: Westpac write "while the global bond backdrop has provided bullish
impetus, AU rates mkts have also re-priced on domestic fundamentals. Q3 GDP
lowered exp. for '19 growth & a speech by RBA Dep. Gov. Debelle was sig in terms
of the forward RBA profile. The mkt has taken Debelle's speech as a sig shift in
RBA messaging & pricing now reflects a very balanced bias for RBA risks, now
almost exactly matching Westpac's view that the RBA is on hold at least until
the end of '20. As a result 3yr & 10yr futures have rallied, matching the moves
in US 10yr yields. That has pushed prices through the upper end of ranges that
have been in place throughout '18. So has the range sustainably breached? We
don't think so. We think it is unlikely that the RBA will cut rates or even
further encourage mkts to price-in that possibility. We have ratcheted price
targets up by around 10 ticks at either end of the range. So, we exp. a lot of
the recent themes to remain in place. Trade the outright with a bias to buying
dips at range lows, but also maintain a range-trading discipline by selling into
strength in lower risk sizes. The curve should maintain a 50-60bp range & AU
cross mkt performance remains very +ve, at least at the longer maturities."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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