The Reserve Bank of New Zealand is likely to keep the official cash rate unchanged at 0.25% and launch funding program for banks to provide stimulus to the economy ahead of rate cut next year. However, some form of interest rate cut cannot be discounted so long as it doesn’t compromise on the RBNZ’s forward guidance. This could include a cut in the interest rate on excess balances in the Exchange Settlement Account System (ESAS) to 10bps from the current 25bps.

The Reserve Bank of Australia’s bond-buying plan under Quantitative Easing is likely to include bonds in the 5-10 year range but its expectation is that it would also drive down bond yields beyond that term.

There is a high degree of certainty around most of the monetary policy decisions the Reserve Bank of Australia will announce at the November board meeting but one decision where there is some uncertainty is the rate on Exchange Settlement balances.

The Reserve Bank of Australia introduced a 0.25% target for Australian government bonds in March and everyone called it Yield Curve Control. Everyone, except the RBA.

With the US election fast approaching on November 3, we lay out guidelines for how FX investors should watch the returns. Our key points are as follows

We recently surveyed clients on expectations around the upcoming US election. This marked the second iteration of our US election survey, with the first having been conducted in early August. The survey was open from 8-12 October and we received more than 50 responses, closely matching the number of responses from our first election survey. Respondents included both US and globally-based investors, surveyed via our distribution channels. The following represent the key findings from our survey:

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The US & Germany 10-30y spreads have been heading in opposing directions for the past week or so. The result has left the US 10-30y spread steeper than in Germany, by around 4bp using the benchmarks.

USTs: At 13:00ET/18:00BST, the Treasury will auction $24bn re-opened 1.625% 8/15/2029s General Views: This week’s supply has been complicated by the looming US/China trade talks and the numerous headlines related to the negotiations. This backdrop may underpin demand for safe assets but makes set-up more difficult and may limit participation at the margin

Japan’s Government Pension Investment Fund -- the world's largest pension fund -- buys the US dollar/ yen (buy US$/sell yen) and then use those proceeds to buys short-end US Treasuries on an unhedged basis, when the US$/yen is about Y108, and then when the US$/Yen moves up to Y110, it sells both, said observers citing an ongoing practice. That would lock in a 1.85% profit on the foreign exchange side, plus some residual P&L from the USTs movement.