AUSSIE BONDS: AU-NZ 10Y Yield Diff Narrows Slightly After RBNZ Decision

The key events this week will be RBA Governor Bullock’s fireside chat on Monday and Wednesday’s Q3 CPI data, which is likely to be a key input into the next RBA decision on 4 November.

• Later on Monday Bullock participates in a fireside chat at the ABE dinner at 1915 AEDT. Comments on the labour market are likely to be scrutinised but with the next Board meeting a week away, she is unlikely to say anything new.
• Bloomberg consensus expects Q3 CPI to rise 1.1% q/q to be up 3.0% y/y after Q2’s 0.7% q/q & 2.1% y/y. This series continues to be distorted by government electricity rebates though and so the focus will remain on the trimmed mean which is forecast to rise 0.8% q/q and remain at 2.7% y/y. The monthly CPIs for September are also released.
• Bullock has said that the Board was concerned about the rise in some of the components of the monthly CPI, especially services. So the change in Q3 market services prices will also be a focal point. It moderated to 2.9% y/y in Q2 from 3.3%.
• Q3 export and import prices print on Thursday. There was a sharp 4.5% q/q drop in the former in Q2. The Q3 PPI is out on Friday.
• In its September statement, the RBA noted that financial conditions have eased and that “credit is readily available to both households and businesses”. Its private credit data for September are published on Friday and the aggregate is forecast to rise 0.6% m/m after August’s 0.6% m/m & 7.2% y/y.

• The PBOC issued CNY337.3bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY189bn.
• Net liquidity injection CNY148.3 bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.45%, from prior close of 1.41%.
• The China overnight interbank repo rate is at 1.36%, from the prior close of 1.38%.
• The China 7-day interbank repo rate is at 1.60%, from the prior close of 1.34%.

The USD/CNY fix hit another low of 7.0881 today (the strongest level in CNY terms since Oct last year), against a market forecast of 7.1145. The fixing error was tighter, but only marginally at -264pips (versus -283pips on Friday). This along with the positive weekend news around US-China trade talks will help keep USD/CNH risks skewed lower. We are close to 7.1100, with a focus likely to be on a test of the 7.1000 region.