Daily Flows & Insights – China Deflation Risk

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.
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Curve Team
Jack Pedersen