AUSSIE BONDS: Yield Curve Looks Too Steep Vs. Mkt Exp For RBA Cash Rate

Money market rates still remain elevated as the PBOC has another day of significant liquidity injection.  The overnight money market rate spiked this morning to its highest level since July.  

• The PBOC issued CNY403.8n of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY117.5bn.
• Net liquidity injects CNY286.3bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.43%, from prior close of 1.49%.
• The China overnight interbank repo rate is at 1.53%, from the prior close of 1.45%.
• The China 7-day interbank repo rate is at 1.54%, from the prior close of 1.50%.

USD/JPY is pressing towards 154.45/50, which has marked recent highs. There has been a variety of official comments this morning, although the only directly FX related one was the remark around weaker yen driving import costs higher. The rest are largely focused on upcoming fiscal support and broader policy goals (positive real wages etc). Broader USD sentiment is firmer, with all of the G10 down versus the USD at this stage (yen is slightly underperforming). US equity futures are ticking up. A clean break higher in USD/JPY is likely to see 155.00 targeted.

Fig 1: USD/JPY Probing Recent Highs 

Source: Bloomberg Finance L.P./MNI 

• CHINA PBOC CONDUCTS CNY403.8 BLN VIA 7-DAY REVERSE REPO TUES