Markets Overview

  • ASX SPI 200 futures down 0.5% to 7,359.00
  • Dow Average up 0.2% to 35,630.68
  • Aussie down 1.5% to 0.6613 per US$
  • U.S. 10-year yield rose 6.6bps to 4.0250%
  • Australia 3-year bond yield fell 12 bps to 3.75%
  • Australia 10-year bond yield fell 8.5 bps to 3.97%
  • Gold spot down 1.1% to $1,944.23
  • Brent futures up 0.4% to $85.74/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 3.75% 2034 Bonds

Treasury futures rose while contracts for the S&P 500 stocks benchmark declined after Fitch Ratings downgraded the US ahead of the open of Asian markets Wednesday. The dollar fell.

The yen and the Swiss franc rose in a sign of demand for havens, with the dollar broadly lower against its Group-of-10 peers. The move by Fitch comes at a particularly sensitive time for rates markets, with the Treasury preparing to ramp up issuance of longer-dated securities.

Cash trading in US government bonds will begin at 9 a.m. Tokyo time, at the same time as equity markets open in Japan, South Korea and Australia.

Sentiment going into Wednesday had already been downbeat, with stock futures for Hong Kong, Japan and Australia all lower. The S&P 500 finished Tuesday’s session with a small loss as the rally that drove the stock market up almost 30% from its October lows took a breather. Bonds fell, with the 30-year yield hitting its highest since November.

Other News

Australia should scale back its plan to require public country-by-country tax information from multinational companies, and follow the more-limited European and OECD approaches, business groups said.

The American Chamber of Commerce in Australia suggested the country should align its tax-disclosure plans with those of the European Union, “to achieve global consistency.” If they aren’t aligned, compliance burdens could result, and companies would be placed at a competitive disadvantage, the group said in a comment letter to the Economics Legislation Committee of Australia’s Senate, which is considering the tax disclosure proposal.

Advocacy groups disagree with the business claims, saying the Australian proposal would help prevent tax avoidance by forcing companies to disclose where their tax payments and profits are located.

Concerns about compliance burdens and keeping commercially sensitive data secret “appear to be greatly exaggerated,” the Centre for International Corporate Tax Accountability and Research (CICTAR) and Tax Justice Network (TJN) Australia said in a joint comment letter.

The comment letters come after Australian officials said in June that they would push back to July 2024 their proposal to require companies to provide public country-by-country tax information. Australia’s Treasury has said the delay would enable it to seek out further feedback and examine how much detail it should require from companies, and to better align its plans with the start of the EU’s country-by-country reporting in mid-2024.

The Australian requirement has drawn criticism because it would go further than country-by-country plans from the OECD, which won’t make companies’ information public, or the EU, which would require country-by-country disclosures only for taxes in EU member states and would allow companies to avoid disclosing commercially sensitive data.

“It is imperative to design these measures with a proper recognition of the vast web of existing global tax reporting requirements, and the legitimate challenges to comply with these overlapping yet misaligned regimes,” according to the Securities Industry & Financial Markets Association’s Asset Management Group, in its comment letter.

Australia’s plan would require companies to disclose too much—more than under the EU plan, the National Foreign Trade Council said in its comment letter. The Australian proposal needs materiality thresholds, and protections to allow companies to avoid disclosing data that could harm them, the NFTC said.

The Tax Executives Institute said Australia shouldn’t be issuing its own plan at all. The group said any obligation to disclose country-by-country tax information must be coordinated through a multinational organization like the OECD.

But the advocacy groups said they are “deeply concerned that further pressure from influential corporate lobbyists may result in reducing transparency and defeating the purpose of the reform.” Australia should implement full public country-by-country reporting as proposed, the groups said, and it “should not be held back by current flaws and failures” in the OECD and EU approaches.

In addition to the disagreements over country-by-country reporting, business and advocacy groups clashed over Australia’s proposed changes in “thin capitalization” rules, which limit the amount of interest payments on debt that a company can deduct.

The Australian Chamber of Commerce and Industry said the thin-cap rules are too harsh, and would lead to the denial of legitimate debt arrangements and hurt production and investment in Australia, among other problems.

But CICTAR and TJN said the thin-cap rules would give companies too much leeway. Allowing interest repayments to related parties has been misused by corporations, enabling them to structure their intraparty loans and interest so as to avoid paying tax in Australia, they said.