AUSTRALIA DATA: Q2 Labour Market Conditions Little Changed

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• Bank Indonesia (BI) announces its meeting decision on May 21 and FX stability will remain its focus but rupiah appreciation since the last meeting may allow it to cut rates for the first time since January.
• 21 of 32 analysts surveyed by Bloomberg are forecasting a 25bp reduction to 5.5% with the rest expecting them to be on hold.
• There are signs that the economy is slowing, inflation is within the target band and expected to stay there and there is significant global uncertainty. However, the question remains if the rupiah has appreciated enough for BI to feel confident to cut rates. 

The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs. The MoF last sold 20-year debt on 15 April 2025, the auction drew cover of 2.9639x at an average yield of 2.349%, an average price of 100.69, a high yield of 2.374%, a low price of 100.35, with 40.8163% of bids allotted at the high yield.

• Today’s 20-year JGB auction follows poor results across key metrics at last month’s auction. The low price underperformed dealer forecasts, which were set at 100.40 according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.9639x from 3.4594x in the previous auction, and the auction tail lengthened dramatically to 0.34 from 0.20.
• However, today’s auction comes on the heels of solid demand metrics observed in this month’s 30-year JGB auctions. The low price cleared at 91.10, aligning with dealer expectations per a Bloomberg survey. Moreover, the cover ratio rose to 3.0739x from 2.9582x, and the auction tail narrowed significantly to 0.30 from 0.75 (the longest since 2023), both indicating a marked improvement in bidding strength.
• Results are due at 0435 BST / 1235 JT.

USD/CNH continues to drift higher, the pair last above 7.2200. Onshore spot has also moved back above this level in the first part of onshore trade. After making fresh YTD lows last week, USD/CNH has struggled to re-test lower. Still, we remain broadly within recent ranges, with USD/CNH bulls unlikely to get too excited until we re-test back above the 7.2500 level/region. 

• In terms of catalysts for this move, uncertainty around US-China trade talks may be weighing on the yuan at the margins. From yesterday, "Beijing has called on Washington to cease discriminatory measures and honour the Geneva consensus, according to a spokesperson for the Ministry of Commerce, following a U.S. industry warning against using Chinese semiconductors, including Huawei" (MOFCOM - via our onshore China policy team).
• BBG noted last week a potential headwind for the yuan was dividend payouts from China firms listed in Hong Kong (see this link).
• In the cross asset space, local equities are higher in the first of Tuesday dealings, the CSI 300 up around 0.20%, but we remain comfortably off recent highs from the middle of the month. Hong Kong markets are outperforming, up over 1%.
• Earlier we had the LPRs lowered as expected.