CHINA RATES: China Repo Rates Diverge On Friday

ASB note that “CPI inflation came out in line with the market consensus and below ASB and RBNZ pick. Non-tradable inflation also undershot expectations. Subsequent dovish market reaction suggest that the market thinks the RBNZ will pare back the 125bps of rate hikes it had signalled for the next few months and join other global central banks in cutting rates before the end of this year.”

• “This could well happen given the emergence of more downside risks to the inflation outlook, but the problem facing the RBNZ at present is that annual inflation has remained stubbornly high, with increasingly widespread price increases evident and with domestic pricing pressures pronounced.”
• “We continue to expect a 75bp hike in February but acknowledge the risk of a more moderate pace of RBNZ hikes (including 50bp in February).”
• “The labour market and for the RBNZ inflation expectations survey will be pivotal leading up to the February OCR decision.”
• “Increasing downside risks to the medium-term inflation outlook also suggest OCR cuts could be bought forward sooner than the August 2024 date we had pencilled in, but not until the RBNZ is confident that NZ CPI inflation will settle in the 1-3% inflation target range.”

The BoJ offers to buy a total of Y1.875tn of JGBs from the market:

• Y500bn worth of JGBs with 1-3 Years until maturity
• Y500bn worth of JGBs with 3-5 Years until maturity
• Y575bn worth of JGBs with 5-10 Years until maturity
• Y300bn worth of JGBs with 25 Years until maturity