US TSYS: Underpinned In Tight Range

Next Tuesday, October 25 the new Australian government will hand down its first budget. Treasurer Chalmers has been at pains to prepare households that there will only be moderate cost-of-living relief which will be focussed on election promises, such as childcare, medicine and education.

• The budget is likely to show an estimated A$150bn boost to revenues over the next four years compared to the previous government’s last budget in March. This is driven by strong export prices, weak AUD, multi-decade low unemployment, income-tax bracket creep and higher inflation boosting GST receipts. However, this windfall is likely to be only temporary. Last financial year, government revenues as a share of GDP hit a 16-year high and the Australian Financial Review (AFR) says that it could even be higher this year.
• Chalmers has also said that budget responsibility is the best way to prepare Australia for a slowdown in global economic growth, which would pullback commodity prices. He stated that he doesn’t want to make the RBA’s job even more difficult. Treasury has cut global growth forecasts by 1pp to 2.75% for 2023 compared to March.
• On the expenditure front, an $8.8bn blowout in the National Disability Scheme's budget over the next four years will be published in the federal budget. The interest bill on the debt is also expected to be A$900bn higher, according to the AFR. To reduce costs, the Treasurer is looking to cut around A$10bn in grants to Australia’s regions, including for infrastructure (The Australian).

China and Hong Kong stock indices are lower, bucking the positive trend seen for most other Asia Pac equities. US futures are higher, buoyed by late earnings new from the US session, notably from Netflix. We are away from best levels though, Eminis peaked close to 3775, but we are now back under 3765. Nasdaq futures have outperformed.

• The HSI is still around 1% lower, as HK Chief Executive Lee speaks during the policy address. Stamp duty for foreigners will be refunded after they stay for 7-yrs. It will also start a scheme to attract high salary earners and top graduates, with visas of 2yrs. The HKEX will also revise listing rules next year to help fund raising for advanced tech companies and SMEs.
• The HSI tech index is still down around 2.5%, but the property sub-index is up nearly 0.9%.
• China stocks are lower, with the CSI 300 off by close to 0.90%, the Shanghai composite is -0.50%, although the property sub-index is close to flat. A number of China property developers are planning to raise funds through state back bond sales, which has helped sentiment at the margin.
• The Nikkei 225 is up around 0.60% at this stage, in in with US tech futures' gains. The Taeix has struggled, down by close to -0.50%, as TSMC has dipped around 2%., The Kospi is in positive territory but only just (last at +0.1%).
• The rest region is positive, although gains are generally below 0.50%.

The Japanese Ministry of Finance (MOF) sells Y2.94826tn 1-Year Bills:

• Average Yield: -0.1098% (prev. -0.1437%)
• Average Price: 100.110 (prev. 100.144)
• High Yield: -0.1018% (prev. -0.1338%)
• Low Price: 100.102 (prev. 100.134)
• % Allotted At High Yield: 29.3793% (prev. 17.4028%)
• Bid/Cover: 2.612x (prev. 3.491x)