JGBS: Little Changed Out To 20Y But Richer Beyond, BoJ Decision Tomorrow

Westpac’s consumer confidence is trending towards the breakeven 100-level. Sentiment rose 5.7% m/m to 98.5 in August, the highest since February 2022, before the last tightening cycle began. The RBA’s third rate cut this year on August 12 helped to boost confidence but the improvement was not just seen amongst mortgage holders. Governor Bullock also pointed out that further easing is consistent with inflation at the target mid-point.

Australia Westpac consumer confidence

Source: MNI - Market News/LSEG

• Westpac notes that with unemployment low and inflation in the band and signs the consumer is recovering, the RBA can remain cautious. It expects rates on hold in September with a cut in November.
• Deputy Governor Hauser noted in July that disappointing consumption growth may have been impacted by a “scarring effect” as sentiment had remained depressed. This data suggests that may have dissipated.
• The improvement was broad based across components with a particularly strong rise in the assessment of family finances with compared to a year ago +6.2% to 84.2 and expected in a year +5.4% to 106.8, positive territory. Lower inflation & rates as well as wage rises & tax cuts appear to be helping.
• In terms of mortgage rate expectations for the next year, just over 50% of those surveyed post the August RBA decision expect them to be lower.
• The “time to buy a major item” increased 4.2% to 101.7, also suggesting recovering purchasing power, but it remains below the historical average.
• Unemployment expectations improved 2.4% in August, the lowest since May. Westpac observes that it is signalling a “stable labour market”.
• “Time to buy a dwelling” rose 10.5% m/m and 37% y/y, but is still below average. Prices though rose 0.9% to 164.2, close to the series high.

Australia Westpac "time to buy a major item"

US equities traded sideways overnight, consolidating as the market awaits Powell's Jackson Hole speech. This morning US futures have seen very little movement, ESU5 -0.05%, NQU5 -0.05%. The JPY crosses momentum higher looks to have stalled for now. 

• EUR/JPY - Overnight range 172.05 - 172.68, Asia is trading around 172.25. This pair is looking to regain momentum to challenge the year's highs, but with Jackson Hole approaching and risk being pared back that seems to have stalled for now.
• GBP/JPY - Overnight 199.39 - 200.27, Asia trades around 199.45. This pair failed once more to extend above 200 yet again. A sustained move back above 200.00 is needed to generate fresh impetus higher, but with risk being pared back it is doubtful it will see anything definitive until Jackson Hole is out the way. 
• NZD/JPY - Overnight range 87.37 - 87.68, Asia is currently dealing 87.60. The pair found solid demand towards the 87.00 area, price looks comfortable back in the middle of its 96.50-99.00 range
• CNH/JPY - Overnight range 20.4858 - 20.5888, Asia is currently trading around 20.5600. This pair continues to find solid demand back towards its pivotal support between 20.30/20.40. A sustained break back below 2.3000 is needed to turn momentum lower again, until then it looks comfortable in a 20.4000-20.8000 range.

Fig 1 : CNH/JPY 2H Chart

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

• The PBOC issued CNY580.3bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY114.6bn.
• Net liquidity injects CNY465.7bn.
• 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 1.46%, from prior close of 1.51%.
• The China overnight interbank repo rate is at 1.54%, from the prior close of 1.45%.
• The China 7-day interbank repo rate is at 1.50%, from the prior close of 1.53%.