JGBS AUCTION: 5Y Supply Faces A Higher Yield & Steeper Curve

August NAB business confidence fell to +4 from +8 but conditions improved to +7 from +5. Both have improved in Q3 to date by around 3 points signalling that GDP growth should continue to recover. The price/cost components were lower in August with purchase cost and retail price increases at multi-year lows, which should reassure the RBA. However, the Q3 average of final product prices is still around where it was in H1 signalling some stabilisation in disinflation. Labour demand also appears to have steadied.

Australia growth outlook

• The pickup in conditions was driven by profitability rising 2 points and employment 3 points to 5.2, its highest in almost a year. Trading was stable.
• The forward-looking orders component rose to +1.4 from -0.2, the highest since April 2023. The export series improved but remained negative.
• Labour costs moderated to 1.5% 3m/3m from 1.9% in July, while purchase costs were 1.1% after 1.3%, the lowest since February 2021. This was reflected in final product prices easing to 0.6% from 0.8% with the Q3 average at 0.7% (Q2 0.6%), while August retail price increases dropped to 0.5% from 1.0%, the lowest in almost 5 years, and down 0.2pp to 0.7% in Q3 to date.

Australia inflation outlook

Source: MNI - Market News/LSEG

Taiwan’s inflows continue. 

• South Korea: Recorded outflows of -$19m yesterday,  bringing the 5-day total to +$591m. 2025 to date flows are -$5,211m. The 5-day average is +$118m, the 20-day average is -$18m and the 100-day average of +$65m.
• Taiwan: Had inflows of +$691m yesterday, with total inflows of +$2,754 m over the past 5 days. YTD flows are positive at +$2,489m. The 5-day average is +$551m, the 20-day average of -$96m and the 100-day average of +$219m.
• India: Had outflows of -$78m as of the 3rd, with total outflows of -$2,088m over the past 5 days.  YTD flows are negative -$15,692m.  The 5-day average is -$418m, the 20-day average of -$215m and the 100-day average of -$3m.
• Indonesia: Had outflows of -$32m yesterday, with total outflows of -$286m over the prior five days.  YTD flows are negative -$3,359m.  The 5-day average is -$57m, the 20-day average +$18m and the 100-day average -$15m.
• Thailand: Recorded outflows of -$45m yesterday, with outflows totaling -$34m over the past 5 days. YTD flows are negative at -$2,531m. The 5-day average is -$7m, the 20-day average of -$42m and the 100-day average of -$14m.
• Malaysia: Recorded outflows yesterday of -$19m, totaling -$142m over the past 5 days. YTD flows are negative at -$3,825m. The 5-day average is -$28m, the 20-day average of -$32m and the 100-day average of -$10m.
• Philippines: Recorded outflows of -$6m yesterday,  with net outflows of -$31m over the past 5 days. YTD flows are negative at -$731m. The 5-day average is -$6m, the 20-day average of -$5m the 100-day average of -$4m.

US Equities are consolidating as the market contemplates what the next potential driving factor will be, interest rate cuts or the slowdown in growth that leads to the cuts. This morning US futures have opened pretty muted, E-minis -0.02%, NQU5 -0.02%. The JPY crosses, unlike USD/JPY for the most part, have held onto their gains from the gap higher on the Monday Asian open.

• EUR/JPY - Overnight range 173.07 - 173.66, Asia is trading around 173.45. The pair consolidated its gains above 1.7300 eventually stalling towards 174.00. I remain skeptical but price action is hard to ignore, let's see if the price can break above 174.00 and extend.
• GBP/JPY - Overnight 199.37 - 200.15, Asia trades around 199.80. This pair stalled again just above 200.00 overnight, a clear sustained break above 200.00 is needed to regain momentum higher.
• NZD/JPY - Overnight range 87.39 - 87.79, Asia is currently dealing 87.50. The pair grinded even higher than the gap on the open, perhaps reflecting positioning ? I would start questioning the short should the price sustain a break back above 88.00.
• CNH/JPY - Overnight range 20.6889 - 20.7777, Asia is currently trading around 20.6900. This pair has remained above its pivotal 20.30/20.40 support. The pair continues to trade comfortably within its recent 20.40-21.00 range. A sustained break back above 21.00 is needed to potentially begin an extension higher.

Fig 1 : GBP/JPY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P