General Data

• Business conditions improve and mood steadies with NAB Business Conditions in June at 8 (prior 6)… while Business Confidence June at 4pts (prior 5pts)

• AOFM tendered 200mil 4.00% Aug 20 inflation linked bonds today at an issue yield of 2.56%, with strong demand

Despite a dip in the headline NAB confidence (to +4 from +5) other components remain robust with conditions (+8 from +6) and trading (+12 from +8) rising, forward orders picking (+6 from -1) and profitability improving (+5 from +1).

Overall the survey shows underlying strength in the economy.

Commentary:

• BBSW closed the day in line with the last few days. 1mth @ 4.74%, 2mth @ 4.84% and 3mth @ 4.865%

• The bond curve steepened 2pts as the 3yr fut's lead the rally.

• AUD dollar eased again from the open, back down to $0.8701,

Data releases -

THE DAY AHEAD...

US: MBA new Mortgage applications, Import Price Index (Jun), Retail sales (Jun), Business Inventories (May)


AUS: Westpac Cons Confidence Index (Jul), Skilled Vacancies (Jul)

We suspect the economic data over the next 24 hours will again play

second fiddle to the success or otherwise of the debt raising in Europe.

We’d be surprised if the outcome is not successful at the headline level but the market reaction may depend on the perceived ‘quality’ of the buyers.

Other news of note will be US retail sales and UK employment data.

Quiet day ahead of revised economic forecasts by the Treasurer and the ‘press club’ address tomorrow from PM Gillard.