NEW ZEALAND: Westpac On NZ Food Prices & Broader Inflation trends
The local bank doesn't see today's food inflation surge will alter next week's RBNZ outcome. However, some trends in inflation are worth watching beyond next week's meeting outcome.
Westpac: "Overall, today’s update suggests some upside risk to our forecast for 0.6% growth in consumer prices in the first quarter of 2025. However, most of the surprise was in food prices or other volatile areas, so might reverse over the coming months.
More notable is the continued softness in domestic costs like rents and hospitality charges. That is consistent with softness in domestic demand.
Overall, we don’t think today’s update will cause too much alarm for the RBNZ ahead of next week’s policy meeting. We still think the RBNZ will deliver a 50bp cut on 19 February.
However, the underlying detail of inflation is changing. Domestic pressures are still easing. But the weakness in imported costs that has pulled inflation down over the past year looks like it is ending. Combined with the fall in the NZD, that’s likely to see inflation linger in the upper part of the RBNZ target range over the year ahead. And that could be an important consideration for the RBNZ’s policy stance beyond February."
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AUSSIE BONDS: ACGB Dec-34 Supply Well Absorbed
Expectations of strong pricing at auctions were confirmed, with the latest ACGB Dec-34 supply achieving a weighted average yield that printed 0.70bp through prevailing mids (per Yieldbroker). The cover ratio also improved, rising to 2.8875x from 2.8375x.
- As highlighted in our auction preview, several factors likely supported today’s strong demand: a higher outright yield; a steeper curve; and the bond's inclusion in the XM basket.
- The deterioration in sentiment towards global bonds over recent months, however, likely weighed.
- The ACGB Dec-34 cash line and the XM futures contract are little changed in post-auction dealings.
AUSSIE BONDS: ACGB Dec-34 Auction Result
The AOFM sells A$800mn of the 3.50% 21 December 2034 bond, issue #TB168:
- Average Yield (%): 4.6378 (prev. 4.4329)
- High Yield (%): 4.640 (prev. 4.4350)
- Bid/Cover: 2.8875x (prev. 2.8375x)
- Amount Allotted at Highest Accepted Yield as % of Amount Bid at that Yield (%): 49.1 (prev. 17.2)
- Bidders: 34 (prev. 34), 17 (prev. 19) successful, 10 (prev. 9) allocated in full
ASIA STOCKS: Foreign Investors Keep Selling Asian Equities To Start The Year
Outflows in all regions on Tuesday with Taiwan continuing to decent selling following chips restrictions being announced from the US, however, while Nvidia has announced they will plan to build a headquarters in Taiwan. India has had the worst start to the year with 2.6b of outflows so far.
- South Korea: Recorded outflows of -$148m yesterday, contributing to a 5-day total of -$287m. YTD flows are flat at $0. The 5-day average is -$57m, worse than the 20-day average of -$70m and the 100-day average of -$146m.
- Taiwan: Experienced outflows of -$352m yesterday, resulting in a 5-day total of -$3.87b. YTD flows are negative at -$2.57b. The 5-day average is -$773m, significantly worse than the 20-day average of -$188m and the 100-day average of -$126m.
- India: Posted outflows of -$495m yesterday, contributing to a 5-day total of -$2.06b. YTD flows are negative at -$2.62b. The 5-day average is -$411m, worse than the 20-day average of -$223m and the 100-day average of -$49m.
- Indonesia: Registered outflows of -$39m yesterday, with the 5-day total at -$94m. YTD flows are negative at -$244m. The 5-day average is -$19m, slightly better than the 20-day average of -$34m, but worse than the 100-day average of +$5m.
- Thailand: Recorded outflows of -$63m yesterday, resulting in a 5-day total of -$188m. YTD flows are negative at -$122m. The 5-day average is -$38m, worse than the 20-day average of -$11m and the 100-day average of -$6m.
- Malaysia: Posted outflows of -$55m yesterday, contributing to a 5-day total of -$203m. YTD flows are negative at -$261m. The 5-day average is -$41m, worse than the 20-day average of -$26m and the 100-day average of -$15m
- Philippines: Recorded outflows of -$15m yesterday, resulting in a 5-day total of -$38m. YTD flows are negative at -$52m. The 5-day average is -$8m, worse than the 20-day average of -$7m but equal to the 100-day average of $0m.
Table 1: EM Asia Equity Flows
