Halister News

(Bloomberg) -- Retail sales seen rising 0.4% m/m in July after advancing 0.6% in June (forecast range 0% to +0.9%).

• In June, 11 of 13 major retail categories showed stronger demand, led by online merchants
• Producer price index seen rising 0.1% in July after increasing 0.5% in June (forecast range -0.4% to +0.4%)

(Bloomberg) -- 10-yr yield drops to lowest since 2006 as weaker-than-expected economic data weigh on growth outlook and stoke speculation of further stimulus.

• Yield on bond due Aug. 2026 down 3 bps to 2.66%, lowest for 10-yr benchmark since Bloomberg started compiling ChinaBond data in 2006
• July new yuan loans 463.6b yuan vs est. 850b yuan; aggregate financing 487.9b yuan vs 1t yuan est.; M2 +10.2% y/y vs est. +11.0%
  • Pressure may be growing on PBOC to ease after loan growth, money supply and factory output data point to slowing economy, says Le Xia, chief Asia economist at BBVA; macro environment favors Chinese sovereign bonds
• July industrial output +6.0% y/y vs est. +6.2%; retail sales +10.2% vs est. +10.5%
• Below est. industrial output and loans data signal weak economic outlook; heavy govt bond buying flows seen, says Chunan Wu, bonds trader at China Zheshang Bank says
• FX reforms may slow in 2H as data indicate pressure on growth: Commerzbank
• Economic data set to weaken further in 2H on industrial capacity cuts, favoring sovereign bond market, says David Qu, markets economist at ANZ Bank China
• 1-yr IRS down 2 bps to 2.4225%; 5-yr contracts down 3 bps to 2.6600%
• Onshore yuan down 0.10% at 6.6441 per dollar, snapping 3-day rally; offshore yuan falls 0.15% to 6.6528
• PBOC weakens reference rate 0.43% after strengthening it 0.41% yesterday
• USD/CNY likely to break above 6.70 before yuan officially joins SDR on Oct. 1, followed by “a period of stability,” ANZ senior FX strategist Irene Cheung says
• China net capital outflows accelerated to $39b in July, most in 6 months: IIF data

--JANA RANDOW

(Bloomberg) -- Pressure may be growing on PBOC to ease after estimate misses for loan growth, money supply and factory output point to a slowing economy, says Le Xia, chief Asia economist at BBVA.

• PBOC should expand scale of liquidity injection, though monetary stimulus will be negative for the yuan and needs to be balanced against the desire for currency stability: Xia
• Shrink in aggregate financing due to recent regulation tightening for wealth-management products
• Macro environment favors Chinese sovereign bonds in this moment
• NOTE: July new yuan loans 463.6b yuan vs est. 850b yuan, while aggregate financing was 487.9b yuan vs est. 1t yuan
  • M2 +10.2% y/y vs est. +11%
• Yuan is down 0.1% to 6.6444 per dollar
• Yield on 2.74% govt bond due August 2026 falls 3 bp to 2.660%

(Bloomberg) -- Recent uncovered BOE purchase operation in 15Y+ sector driven by a combination of usual drop in liquidity during summer period and lack of consensus for an expansion of Gilt QE going into the BoE’s August, leaving many not positioned, writes BofAML Ralf Preusser in a client note.

• Next long-end purchase operation on Aug. 16 will be in focus; expect a “much healthier cover”, as seen in this week’s medium-dated operation
  • Low amount of offers have woken the market up to lack of natural sellers to the BOE in long end; could lead to more speculative offers being made above market prices
  • The tail on next week’s long-end reverse auction is likely to be of more interest, with a large tail signifying that BOE has paid above market rates to source the bonds

• NOTE: Latest long-end purchase was uncovered, with offer ratio of 0.96x; BOE paid a significant premium to market prices on all bonds, led by 01/2060 issue, which was bought at an average price 103p above market prices

Economic Release Details: {HKGDQOQ Index ECOD} --SIMON LEE