AUSSIE BONDS: Futures Tick Lower, AU-US10yr Spread Still Elevated

In local morning trade, NZGBs are 1-2bps cheaper after US tsy yields ended Friday 2-4bps higher on the bounce in risk appetite and as the market continued to digest the $125 B in new supply after poor auction take down. 

• Wall Street rallied after an erratic week that was marked by more tariff news, earnings beats, Fed policy considerations, and geopolitics. Strength in big tech with a fresh high on the "Magnificent Seven".
• St Louis Fed Pres Musalem (2025 FOMC voter, hawk) says in a Q&A that he supported the July decision to hold rates as the FOMC is missing on its inflation target but not its employment target. He says that looking forward, they may miss on both sides of the mandate - but doesn't sound too concerned about the labour market (noteworthy given the weak July payrolls report) albeit he sees risks to the downside. And he eyes potential upside tariff-related risks to inflation.
• Swap rates are 1-3bps higher, with a steeper 2s10s curve.
• RBNZ dated OIS pricing is little changed across meetings. 23bps of easing is priced for August, with a cumulative 41bps by November 2025.
• Today, the local calendar will be empty. The next release will be Card Spending data on Wednesday.

• The July release over the weekend for China's inflation data confirmed more of the same as deflationary pressures remain.  
• China's July CPI release was 0.0%, from 0.1% in June.
• The July PPI release was -3.6%, in line with June's -3.6%.  PPI has not produced a positive print since September 2022.  
• The PBOC (People's Bank of China) has set a CPI (Consumer Price Index) inflation target of around 2% for 2025. This target was reaffirmed at the National People's Congress in early March, alongside a real GDP growth target of around 5%.  Whilst the 1Q and 2Q GDP remain on target (2Q GDP printed at +5.2%) CPI continues to lag.  
• The government is ramping up the 'anti-involution' approach aimed at curbing the price wars.  It is currently viewed as one of the critical issues for the economy.  The campaign is aimed at curbing intense, often unproductive, competition, particularly in industries with overcapacity, leading to price wars and declining profits. The campaign seeks to promote healthier competition, improve product quality, and enhance overall economic stability.

The focus of the week will be on Tuesday’s RBA decision, it is widely expected to cut rates 25bp to 3.6%, but there are also a number of key data releases too. Q2 wages print on Wednesday and July jobs data Thursday.

• The RBA announcement at 1430 AEST will include how the Monetary Board voted and an update of staff projections. Governor Bullock will hold her usual press conference at 1530 AEST.
• Before the RBA, the July NAB business survey will be released. Conditions have been gradually deteriorating for some time and the price/cost components will continue to be monitored.
• Q2 wages on Wednesday are forecast to moderate slightly rising 0.8% q/q & 3.3% y/y after Q1’s 0.9% q/q & 3.4% y/y.
• Wednesday also sees home loan data which recorded a 1.6% q/q decline in Q1 and projected to rise 2.0% q/q in Q2.
• July labour market data print on Thursday and will be watched closely for signs of further deterioration. Apart from the headline employment/unemployment figures, underutilisation and hours worked also need to be considered. Bloomberg consensus has the unemployment rate unchanged down 0.1pp to 4.2% after rising 0.2pp in June and employment +25k.