EUROPE: Widespread Holiday Closures Today

France, Belgium, the ESM, Greece and the EU are all due to sell bills this week. We expect issuance to be E15.9bln in first round operations, down from E21.4bln last week.

• This morning, Belgium will look to sell to a combined E2.4-2.8bln of the following TCs: An indicative E0.8bln of the 3-month Jul 10, 2025 TC, an indicative E1.0bln of the new 6-month Oct 16, 2025 TC and an indicative E0.8bln of the 12-month Mar 12, 2026 TC.
• Also today, the ESM will issue up to E1.1bln of the new 3-month Jul 3, 2025 bills.
• Tomorrow, Greece will come to the market with E500mln of the new 13-week Jul 4, 2025 GTB on offer.
• To conclude the week tomorrow, the EU will look to sell up to E1.5bln of the 3-month Jul 4, 2025 EU-bill, up to E1.5bln of the new 6-month Oct 3, 2025 EU-bill and up to E1.5bln of the new 12-month Apr 10, 2025 EU-bill.

• China's CAIXIN PMI , which emphasizes smaller, private, and export-oriented companies expanded in March in spite of US tariffs. The private sector survey result of +51.2 was a marked improvement from +50.8 the month prior.   This was the sixth consecutive month of expansion (i.e. above 50) and the best result since November last year.  The results indicate a positive outlook from private companies which for many observers recognizes a clearer outlook for the broader economy.
• According to a statement released, the PBOC did not conduct any government bond buying or selling for all of March for the third consecutive month. (source: PBOC):
• China's Hang Seng lead the way rising +1.06%, gradually pushing it into positive territory over the last five days. The CSI 300 is up +0.29%, Shanghai Comp +0.59% and Shenzhen up +0.90%.
• CNY:  Yuan Reference Rate at 7.1775 Per USD; Estimate 7.2540.
• A modest day in the bond market with the CGB 10YR 1bp lower in yield at 1.80%

A rate cut wasn’t discussed this week but the Board looked at downside risks to growth and inflation. It was a consensus decision. The economy is “broadly” developing in line with the RBA’s outlook. As inflation pressures remain, it will wait for more information to see if it adds to its confidence that underlying inflation is moving sustainably towards the mid-point of the target band. With greater confidence, the Board can consider the timing of further easing.

• Governor Bullock noted that neither she nor the Board have made up their minds re the May meeting. If the updated staff forecasts and upcoming data, including Q1 CPI and two labour market prints, make it “more confident” that inflation is sustainably returning to the band then it will consider another rate cut. It remains more cautious than market pricing implies and the May projections will determine if that view persists.
• Bullock reminded us that Australia doesn’t have as much restrictiveness to remove as others.
• There were a lot of questions regarding US tariffs given the imminent announcement. Governor Bullock noted that Australia is unlikely to have a material direct impact given its small exposure to the US but how its main trading partners & supply chains are affected, notably China, and retaliatory measures are areas of concern. China’s focus on its 5% growth target and related stimulus should mean the effect on Australia is minimal, thus the Board has time to watch and wait.
• The RBA is well positioned to react with rates and the currency will also provide a buffer, which usually happens with lower commodity prices and global growth. A prolonged trade war would reduce global activity which would be a problem for Australia.
• While the impact on inflation is unclear, the RBA will continue to focus on containing inflation as uncontrolled inflation drives higher unemployment.
• Central banks will be looking for a price level shift from tariffs that becomes ingrained in inflation.