RBA Debelle Lays Out Various Options For Australia Policy

Sep 22 20, 06:35 GMT

General Trend

Markets were weaker tracking Wall St lead overnight, as uncertainty continues and COVID cases climb forcing some major countries to implement additional lockdowns. Korea’s Kospi fell after Korea passed its 4th extra budget (as planned).
Australia RBA Deputy Gov Debelle indicated that buying longer dated bonds is a possible option as well as cutting rates or negative rates. Reiterated negative rates were not seen as a good option. Felt like the A$ is a reflection of fundamentals and any intervention would likely not be impactful. Gave no hint at when the next policy shift could take place.
PBOC set yuan mid point rate at its lowest setting since early April, after nearly a quarter or rapid appreciation, a possible signal that policy makers may be ready to rein in the currency, prior to today’s setting was on track for its largest quarterly gain since early 1980s. Chinese press so far has called the strength a signal of economic recovery.
China also made a CNY350B injection via its open market operations heading into the end of the quarter and the week long Autumn holiday starting October 1st.
An Op Ed in China’s Global Times noted that they do not expect the Chinese govt to allow the TikTok, Oracle, Walmart deal to go through

Headlines/Economic Data

Australia/New Zealand

ASX 200 opened -0.6%
(AU) Victoria state (Australia) reports 28 additional coronavirus cases v 11 prior; 3 additional deaths v 2 prior; Melbourne rolling 14-Day avg: /day v 34.4/day prior
(AU) Reserve Bank of Australia (RBA) Deputy Gov Debelle: Option is to buy bonds further out on curve to lower rates at longer maturities or lower cash rate but not negative, or go into negative rates (does not signal possible timing for next move); Not clear if intervention would be effective as the AUD is in line with Fundamentals
(AU) Australia Debt Agency (AOFM) Announces details of Sept 2026 Bond Syndicate sale at 0.50%

Japan

Korea

Kospi opened -0.1%
(KR) South Korea Aug PPI M/M: +0.5% v +0.2% prior, Y/Y: -0.5% v -0.8% prior (3rd consecutive increase)
005380.KR Union agreed to freeze wages for the first time in 11 years
(KR) South Korea Ruling and Opposition parties are reported to have agreed on the KRW7.8T 4th extra budget – Yonhap

China/Hong Kong

Hang Seng opened -0.5%; Shanghai Composite opened -0.8%
(CN) China PBoC Open Market Operation (OMO): Injects CNY350B in 7-day and 14-day reverse repos v Injects CNY140B in 7-day and 14-day reverse repos prior; Net inject CNY350B (largest injection since Feb 4) v Net inject CNY60B prior
(CN) China PBOC sets Yuan reference rate: 6.7872 v 6.7595 prior (lowest setting since mid-April)
(HK) HKMA sold a total of HK$16.872B v HK$14.7B prior to defend currency peg amid strength, currently at 7.7501
(CN) Companies in china are selling a record amount of investment grade dollar bonds this quarter, expected to remain strong into Q4 amid lower borrowing costs – China press
(CN) Follow Up: China to invest CNY9.5T into the semiconductor industry by 2025 – press
(CN) China Premier Li: China will support further opening up of Shanghai free trade zone; China should prioritize unemployment to stabilize economy

North America

(CN) US President Trump: China has been living up to the Phase 1 trade deal
(US) Two Republican Senators introduce legislation to provide $28.8B in assistance to airlines to avoid further job cuts – Press
(US) NY Fed’s Williams: Central Bank does its part to address wealth and income inequality using monetary policy and community development
(US) Fed’s Bullard (non-voter): Supported FOMC decision last week; Fed new approach to lifting inflation is likely to work; have already delivered enough fiscal aid – US press interview
(US) Senator Graham: GOP has the votes to confirm a Supreme court pick before the election

Europe

(DE) Germany Aug Tax Rev -2.3% y/y; YTD -7.3% y/y
(UK) UK PM Johnson said to have told MPs that he will tell people in UK on Tuesday that people should work from home if they can – Press

Levels as of 1:15ET

Hang Seng -0.7%; Shanghai Composite -0.4%; Kospi -2.3%; Nikkei225 closed; ASX 200 -0.5%
Equity Futures: S&P500 -0.2%; Nasdaq100 -0.3%, Dax -0.1%; FTSE100 +0.7%
EUR 1.1774-1.1753; JPY 104.75-104.47; AUD 0.7235-0.7192; NZD 0.6681-0.6653
Commodity Futures: Gold +0.5% at $1,919/oz; Crude Oil +0.1% at $39.59/brl; Copper +0.6% at $3.05/lb