US TSY FLOWS: BLOCK SELL FVZ5

Westpac’s lead index signalled slowing growth in August with the 6-month annualised rate turning negative (-0.16% down from July’s +0.11%) for the first time since September 2024. Almost all variables have eased over the last 6 months. It is signalling that growth on a 2q/2q basis could slow over the coming quarters. 

Australia growth outlook %

Source: MNI - Market News/LSEG

• Westpac is forecasting Australian GDP growth of 1.9% in 2025 up from 2024’s 1.3% with it returning to trend next year. Its Card Tracker suggests that private consumption slowed over Q3 to early September. It expects the RBA to be on hold in September but then ease 25bp in November and twice more in 2026.
• Westpac consumer unemployment expectations has been the largest contributor to the moderation in the lead index over the last half year. It rose 4.6% in September’s consumer sentiment survey to the highest in a year and just under the series average. Thus it and confidence (-3.1% m/m Sept) are likely to continue to weigh in the next lead index.
• Commodity prices in AUDs, Westpac consumer sentiment and dwelling approvals also contributed to the moderation. Hours worked, the yield spread and US IP also made slight negative contributions with only Australian equities positive. 

• The PBOC issued CNY418.5bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY304bn.
• Net liquidity injects CNY114.5bn.
• 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 1.49%, from prior close of 1.49%.
• The China overnight interbank repo rate is at 1.51%, from the prior close of 1.46%.
• The China 7-day interbank repo rate is at 1.57%, from the prior close of 1.50%.

Expectations of sustained strong pricing at auctions proved accurate, with the latest round of ACGB Dec-35 supply seeing the weighted average yield print 0.26bp through prevailing mids (per Yieldbroker).

• However, today’s cover ratio fell dramatically to 2.1583x from 3.2417x.
• As noted in our auction preview, the current outright yield was 5bps lower than the previous auction and approximately 50bps lower than the peak in late 2024.
• The 3/10 yield curve was also around 5bps flatter than the previous auction level and sat around 25bps below its recent high.
• Post-auction, the ACGB December 2035 cash line and the XM futures contract are both trading little changed.