AUSSIE 10-YEAR TECHS: (U2) Downtrend Accelerates

• RES 3: 97.870 - High Mar 3
• RES 2: 97.455 - High Mar 18
• RES 1: 97.185 - High Apr 5
• PRICE: 96.600 @ 16:26 BST May 13
• SUP 1 96.330 - Low May 9
• SUP 2: 96.182 - 3.0% Lower Bollinger Band
• SUP 3: 96.133 - 0.5% 10-dma envelope

Aussie 10y futures returned to cycle lows to begin last week, accelerating the downside theme. The move lower exposes next support posted at the 3.0% Lower Bollinger Band at 96.182, ahead of a stronger area of support at the 0.5% 10-dma envelope - which crosses at 96.133 currently. Initial resistance is at a recent high of 97.185 on Apr 5.

TYM2 is marginally below late Friday NY levels, -0-01+ at 119-04, although the contract hasn’t breached the lower boundary of Friday’s range. Participants are assessing weekend news flow, which was headlined by China cutting mortgage rates for first-time property buyers, Shanghai’s gradual re-opening from today, India imposing restrictions on wheat exports and Sweden & Finland being on course to lodge NATO membership applications. The positives surrounding China seem to be dominating, with e-minis 0.2-0.6% above settlement levels, with the NASDAQ leading.

• To recap, the Tsy curve bear steepened on Friday, with the major benchmark Tsys running 2.0-8.5bp cheaper come the bell. A rally in equities helped heap the pressure on, with rhetoric from Fed Chair Powell re: two-way risks to the wider Fed tightening cycle (outside of his preference for a couple of 50bp hikes at the next couple of meetings)/noting that the ability to deliver a soft landing may be impacted by factors that are outside of the Fed’s control, later echoed by Cleveland Fed President Mester (’22 voter), also pointed to (by some) as a driver of the sell off. Flow also fed into the wider steepening move, with a UXY/US block steepener noted (+4,475/-3,000). Note that a fresh cycle low for the headline UoM sentiment reading helped the space find a base during the NY morning, before the long end posted fresh session cheaps into the close.
• Chinese economic activity data and the latest round of PBoC MLF operations will garner most of the focus during Asia-Pac hours. Further forward, NY Empire manufacturing data and Fedspeak from NY Fed President Williams headline the NY docket on Monday.

The kiwi dollar has caught a light bid in early trade, following a bounce in U.S. equity benchmarks on Friday. Weekend impetus from China may be providing some incremental support as well, as the PBOC effectively trimmed the interest rate for new mortgages, while Shanghai announced moderate, partial easing of COVID-19 restrictions.

• NZD/USD trades at $0.6286, up 10 pips on the day. A clearance of May 11 high of $0.6380 would bring May 5 high of $0.6568 into play. Conversely, bears look for renewed losses past May 12 cycle low of $0.6217.
• PM Ardern has tested positive for COVID-19 and is self-isolating at home with moderate symptoms. She will not be able to chair today's Cabinet meeting and will skip this week's Budget, but is still planning to lead New Zealand's trade mission to the U.S.
• Data highlights this week include PPI (Thursday) as well as trade balance & credit card spending (Friday).