AUSTRALIA DATA: Weak Iron/Coal Demand Drives Q2 Export Prices Down

ACGBs (YM +2.0 & XM +3.5) are modestly stronger after a relatively subdued Sydney morning session to start the new financial year. 

• Outside of the previously outlined house value and PMI manf data, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are flat to 2bps richer, with a flattening bias, in today's Asia-Pac session, extending yesterday's bull-flattener.
• The cash 10-year is 4bps richer, with the AU-US 10-year yield differential at -7bps.
• The bills strip is slightly mixed, with flat to +2.
• RBA-dated OIS pricing is flat to modestly softer across meetings today. A 25bp rate cut in July is given a 95% probability, with a cumulative 83bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• This week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Wednesday and A$1000mn of the 2.25% 21 May 2028 bond on Friday.

China will grant foreign investors a 10% corporate income tax credit on direct domestic investments funded by dividends from Chinese resident companies, Xinhua News Agency reported. The measure, which takes effect from January 1 2025 through December 31, 2028, allows qualified firms to carry forward unused credits and apply lower rates under existing tax treaties. Eligible investors may reinvest dividends in equity capital, establishing new resident enterprises, or buying resident firms’ shares from non-affiliated parties, the newspaper said.

China has approved additional Qualified Domestic Institutional Investor (QDII) quotas, taking the total to USD170 billion by the end of June 2025, up USD3 billion month-on-month, Securities Times reported. The measure follows comments from Zhu Hexin, deputy governor at the People’s Bank of China and director at the State Administration of Foreign Exchange, that authorities would soon issue new allowances to meet the reasonable needs of domestic entities for overseas investment. Regarding future plans, a SAFE official said the government would seek to balance financial openness and security, and continue issuing QDII quotas in a measured manner.