INDIA: August CPI Preview

In post-Tokyo trade, JGB futures closed weaker, -18 compared to settlement levels, after US tsys finished with a twist steepening on Tuesday.

• The focus was on the July CPI for insight on the FOMC's policy path. That the data failed to surprise on the hotter side of expectations opened the door a little wider for a September rate cut.
• Despite a further acceleration in monthly core inflation in July, there was an unexpectedly steady rate of core goods CPI - key to the overall inflation outlook given expectations for tariff passthrough to accelerate this summer. (MNI's Inflation Insight has more details, PDF here).
• That provided a strong underpinning for Wall Street which climbed to record highs.
• (Bloomberg) -- "Japan's current benchmark 10-year government bond wasn't traded at all on Tuesday, the first such instance in more than two years, according to data from an institutional brokerage."
• Today, the local calendar will see PPI and Machine Orders data alongside 5-year supply.

ACGBs (YM +1.5 & XM -1.0) are slightly mixed after US tsys finished with a twist steepening on Tuesday as the key details of the July CPI report came in softer than widely expected.

• Despite a further acceleration in monthly core inflation in July, there was an unexpectedly steady rate of core goods CPI - key to the overall inflation outlook given expectations for tariff passthrough to accelerate this summer. (MNI's Inflation Insight has more details, PDF here).
• The short-end saw a post-CPI rally, buoyed by deepening Fed cut expectations: a 25bp reduction in September is now 94% priced (up from about 88% Monday), with 60bp of cuts through end-2025 (up from 57bp Monday).
• Cash ACGBs are 2bps richer to 1bp cheaper with the AU-US 10-year yield differential at -4bps.
• The bills strip is flat to +2.
• RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in September is given a 37% probability, with a cumulative 52bps of easing priced by year-end.
• Today, the local calendar will see the Q2 Wage Price Index.
• The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond today and A$1000mn of the 2.75% 2 1 November 2029 bond on Friday.

In local morning trade, NZGBs are unchanged after US tsys finished with a twist steepening on Tuesday as the key details of the July CPI report came in softer than widely expected.

• Despite a further acceleration in monthly core inflation in July, there was an unexpectedly steady rate of core goods CPI - key to the overall inflation outlook given expectations for tariff passthrough to accelerate this summer.
• The short-end saw a post-CPI rally, buoyed by deepening Fed cut expectations: a 25bp reduction in September is now 94% priced (up from about 88% Monday), with 60bp of cuts through end-2025.
• With the next RBNZ meeting approaching (August 20), this week contains a number of high frequency releases that the MPC monitors and should give a sense for how the economy began Q3.
• NZ retail card spending rose 0.2% m/m in July.
• On Friday, the July BNZ manufacturing PMI Index and July monthly price series are released including food, travel, electricity and rents.
• Swap rates are little changed.
• RBNZ dated OIS pricing is little changed across meetings. 23bps of easing is priced for August, with a cumulative 41bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond and NZ$250mn of the 2.75% Apr-37 bond.