EM ASIA CREDIT: Indonesia (INDON): New Biofuels

• The PBOC Issued CN0 bn of 7-day reverse repo at 1.4% during this morning's operations.
• The PBOC issued CNY469.7bn O/N reverse repo
• Total maturities today CN0Ybn 7-day and CNY565.5bn O/N
• Net Liquidity withdrawal CNY95.8bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Daily Pledged Repo DR007 Wgtd Rate's is 1.3714% following the last close of 1.3827%.
• The China overnight interbank repo rate is at 1.3503%, from the prior close of 1.3445%.
• The China 7-day interbank repo rate is at 1.37% from last close of 1.3600%
• The 2-Yr NDIRS is at 1.3950% having closed last at 1.400%.

August Westpac consumer confidence jumped 6% m/m to 88.9, which is still in pessimistic territory but the highest reading since March. The second consecutive RBA policy hold provided support, as the gain was predominantly among mortgagees, even though retail fuel prices are sharply higher. Despite ongoing household pessimism, private consumption has been solid especially of discretionary items. Westpac believes the RBA will continue to pause in September as there is limited inflation data before then.

• The survey was taken over August 10-14 and Westpac notes before the 11 August RBA announcement sentiment was little changed and “all the monthly improvement” was following the decision despite Governor Bullock’s warning that rates will rise again if inflation doesn’t moderate as expected.
• The improvement in questions regarding the outlook was less than for the present, which Westpac believes is because of ongoing heightened uncertainty from the Middle East and therefore rates. It may also reflect the unknown effect of domestic tax changes, especially on housing.
• 59% of respondents still expect mortgage rates to rise further and the share was similar pre- and post-RBA.
• “Family finances vs a year ago” rose 12.6% which likely is helping to support spending as shown by the 8.1% rise in “time to buy a major household item”. The sharp improvement was despite retail petrol prices 22% higher in the 4 weeks to 9 August.
• Unemployment expectations rose 4.4% but at 135.7 remain below the Q2 highs.
• Following government tax change plans, there is increased attention on the housing market. Westpac’s “time to buy” increased 12.1% likely due to stable rates and the recent fall in prices, which consumers expect to decline further with the Westpac expectations index down to its lowest in 3 years in August. 

Australia Westpac consumer sentiment vs “time to buy a major household item”

Source: MNI - Market News/LSEG

The BBDXY range overnight was 1197.34-1200.79, Asia is currently trading around 1199, -0.05%. The US Dollar is trading heavily toward its recent lows. The headwinds for the broader US Dollar seem to be mounting and the market is attempting to challenge the pivotal 1195-1200 area. For now it continues to hold as the move in Oil and the long-end of the US rates market provide it with some support. I have been skewed toward fading this dip, looking for a retest of the pivotal 1230-1235 area at some point. So I will be watching closely to see how this recent clean out of longs continues to unfold. The wind has been taken out the bullish USD sails for now, and I am looking for some consolidation as the market tries to find its footing again. Strong support comes in around 1195-1200 but a sustained break back below 1195 and we could see the downtrend reassert itself and the probability of a bounce back toward 1230 becomes greatly reduced.                               

• Danny Citrinowicz on X: “Iran's growing incentive to escalate leaves Trump with no easy way out. Deliberations in Tehran over a shift to an "offensive approach" reflect a change in Iranian thinking: The greater the economic pressure, the stronger the incentive to initiate a new conflict. Sanctions are hurting, but they are unlikely to force the regime into a public surrender. Washington will have to choose between costly, unpredictable escalation and accepting Iran's terms.” https://x.com/citrinowicz/status/2089464300540731832?s=20
• Tracy Shuchart on X: “US 30 year yields just hit 5.31%, a level not seen since 2004. For equities, the bond market doesn't matter, until it does. The long end doesn't believe Warsh will hold the line on inflation and Bessent can't hide behind bills forever.”
• The BBDXY Average True Range for the last 10 Trading days: 3.48 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P