JGBS: Twist-Flattener Holding At Lunch

ACGBs (YM -2.0 & XM -2.0) are modestly cheaper with narrow ranges. 

• The July Westpac consumer confidence index rose 0.6%m/m, putting the index at 93.1 (from 92.6 in June). The edge higher comes despite last week's surprise RBA on hold decision. Sentiment is up from recent lows, but still below recent highs, leaving us within recent ranges.
• In terms of the CSI sub-indices, the time to buy a major household item fell by 2.6% (after gaining 7.5% in June). The buy a dwelling question fell by 5.1% (after a 3.6% gain in June). Family finances improved from a year ago and for the year ahead.
• Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at -5bps.
• Today’s Jun-54 auction result extended the recent trend of firm pricing for ACGBs, with the weighted average yield printing 0.24bps through prevailing mids, according to Yieldbroker. Moreover, demand improved, as reflected by a cover ratio of 3.2133x, up 2.8433x from the previous auction.
• The bills strip weaker, with pricing -2 to -4.
• RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in August is given a 90% probability, with a cumulative 57bps of easing priced by year-end.

China tech related stocks are rallying in the first part of Tuesday trade, albeit sit away from session highs in latest dealings. Headlines crossed a little while ago, that US AI/chip bellwether Nvidia would sell its H20 chip to China again. BBG noted: " Nvidia Corp. plans to resume sales of its H20 artificial intelligence accelerator to China, after it received assurances from the US government that it would be granted licenses, the company said in a blog post." (see this link). 

• The headline CSI 300 index was up around 0.60%, but is now back to flat, while the HSI is up close to 0.65% in latest dealings. The HSTECH sub index is +1.2%. The ChiNext index is up close to +2%.
• US equity futures are also higher, with the Nasdaq outperforming, last near +0.40%.
• China data releases today have been mixed, house price momentum faltered, while GDP growth was a touch above expectations (y/y holding above 5%).
• Retail sales was below expectations for June though, while IP was better than forecast. Fixed asset investment cooled, with property investment slowing further (along with property sales).
• The CSI 300 real estate index is down around 0.85%, taking some gloss off the tech related rally. 

China should allow local governments to tap into future bond quotas to proactively address off-balance sheet debt, analysts told Yicai.com. In the first half of the year, approximately 81% of the 2025 quota for resolving implicit debt, equivalent to CNY2.26 trillion in government bonds, was utilised, the outlet reported. With only CNY539 billion remaining under this year’s quota, analysts suggest leveraging future quotas, which stand at CNY2.8 trillion in 2026, and CNY800 billion each in 2027 and 2028.