Daily Flows

• The TD market enjoyed a healthy supply of funds yesterday that was placed  across the BBB space.
• With many ADIs on the bid, market participants were able to diversify their investments, whilst also locking in competitive yields of 5.70% for 6 months.
• There a signs of liquidity tightness easing in the market which is reflected in increased NCD activity.
• 3 month Margins are still on offer at +50 for new funds.

China Deflation Risk

• Yesterday, Chinas inflation rate was 0% YoY with a -0.2%MoM for the month of June.
• Producer prices dropped by 5.4% YoY for June 2023 reflecting the weakened demand and moderating commodity prices.
• The timing and style of China’s COVID recovery is starkly different to Australia and the rest of the world.
• This print increases expectations that policy makers may need to be more proactive in an attempt to increase demand.
• Continued Chinese weakened demand presents risk to Australian export prices.
• A sliver lining is that weakened Chinese demand has a dampening effect on global goods inflation.