[CC may contain inaccuracies] You said this is the last piece of the puzzle of China opening up. How big of a deal is it. Well this is a trilogy of indices.
So if we go back previously there was the inclusion of the GBM which is very dedicated M and index and there was the aggregate
beam of the Bloomberg index. Now this is the final one which is the week B. So yes this is important in terms of flow funds and
it starts as of today in terms of inclusion relative for next month. And what kind of inflows are you expecting now. Yes. So
it's a more protracted period. So if you look at the previous indices it took 10 months for the GBM and 20 months for the
Bloomberg AG. This one is 36 months but the flows are still quite meaningful. 130 billion dollars is our estimates. That
equates to three point six billion per month. Compare that to the two indices just described earlier. That's about. That was
around 5 billion per month. But nevertheless it's a longer period of time.
Well Andre it's my turn. My apologies. I thought if one had another one I did. I was going to give you a chance. OK. Well
I'll get for it. I'd say that say that question. I mean it. This is a milestone yet again. It reminds us of how underweight the
world is online on Chinese bonds and increasingly less so of course
now that we have this sort of end of the trilogy. You know when The Godfather Part 3
from from this perspective from a global portfolio perspective ideally what what should be that waiting for global investors as
far as CGI these are concerned. And still worth still we re watching The Godfather and same for these indices. I think over
time not the third one and two are good things. But for the contending banks. So the bond indices for China I
think it's a good question. And if you look the weighting as of September international ownership of China government bonds even
increased fairly rapidly is still fairly low at ten point six per cent. And we think that should at least rise to 15 percent
over next couple of years. But again when you look at more competing in markets in the developed markets in GM it should be
much higher than that. And the peculiarity is that actually the bond markets outperformed every other versus D.M. year to date.
So it still is underweight but its peers and you're one of the biggest bulls out there. HSBC some of your forecast. Take this
down to two and a half hours under 10 year at least ten year yield two and a half percent by next year. Take us through that
thinking. Yeah well we've had these sort of calls over the past. What's a year now. Right. We come in an ounce and talked about
China and bonds. We've been pounding on the table and we continue to pound on the table. And it's not just about the
returns. It's about the stability returns which is very important as we speak today and yesterday can shop movements out
elsewhere. But there's a good case to be made as certainly with the deceleration in growth and piecemeal stimulus coming
piecemeal stimulus is adequate. A triple aka not as piecemeal as not. So it's still sort of liquidity. And if there is going to
be a trip like that it will be delayed and a more talked in nature and probably into next year. On this year there has been
some people saying if there is any kind of drawback to this inclusion is that it's becoming more mainstream and perhaps you
are losing that diversification factor when it comes to Chinese bonds. What do you say to that that this kind of low correlation
aspect of Chinese bonds is going to be eroded eventually at some stage. Yes. But in terms of the clustering correlation we're
seeing in most markets at the moment in time China is not part of that. And as I said earlier sort of a 10 percent weighting
does not really subscribe to being part of the global bond markets as yet and including most of the economies. And policy
is also gone through its own cycles. So to me it's still too premature to think about that. But setting aside the reasons or
why they chose to do this. I mean Japan's pension funds said that they will not be investing. What what what effects do you
think that might have short term or is that still negligible to you. It is fairly minimal. Yes. It took the headlines a couple
of weeks ago when the government pension investment funds in Japan mentioned that they wouldn't participate in the week. And
it's a sizeable fund. It's the biggest state pension fund in the world I believe at one point seven trillion. But when you start
to look at the actual allocation to foreign bonds then the flows of passive indices and then particularly an allocation of say
five point nine percent Emma Chandra bonds it's around 15 billion inflows that we missed. That's still a fairly drop in
the ocean when you compare 130 billion which we anticipate. What do you anticipate the flows to come from. I think that's the
next question. Yeah. Well there are other accounts aside from the Jeep if Japan I still think there will be some Japanese
float funds. Indeed the weekly is quite a passive index and Japanese accounts are quite key component. So I think Japan and
then also the the US players looking to diversify again based on what Yvonne mentioned the you know the diversification
attributes will be the likes of U.S. Treasury traders as well. Will investors like you look at broader E.M. you've been talking
about the price premium that we're seeing across developing markets right now. Where are we in this interest rate cycle do
you think. It's very early stages. I mean there's only one exception to the rule and that's Russia.
They just raised the stakes even further with the previous rate rise of 75. But if you look at implied rates the markets
beginning to turn the cycle come 12 months to 24 months but all the rest is escalating further and further. So whatever you
thought was what we called in parlance in bond terms terminal rates you've got an additional premium. Just look at what's
happened past 24 hours where the correlation or causality the Australian moves being magnified in EMC. Certainly some of the
high yield is what do you think they're going to do next week though for the RBA. Well we don't think they will shift in terms
of policy rates but this phrase about Yoko control around 10 basis points is stretched to the limit. And we know that since
probably 75 basis points at the current juncture. So there is strong risk that they abandon it but it doesn't mean it's policy
exit. It's just being realistic to what's happening elsewhere. Cleaning bank. And Bank of England. And prospects of FET as
well. Next week.