US TSYS: 10-Year Yield Fails Above 4.5% At First Attempt
TYM5 reopens at 110-12, up 0-04 from closing levels in today’s Asia-Pac session.
- Overnight US 10-year yields had a range of 4.4275% - 4.5383%, closing around 4.43%.
- Treasury yields ended lower overnight, with yield curves mixed (2s10s -1.48 at 46.651, 5s30s +2.84 82.946 ).
- Treasuries finished near their session highs, well off their early lows after last night's heavy round of economic data: PPI lower than expected (priors up-revised, however), retail sales largely in line w/ prior up-revised, weekly claims largely in-line.
- MNI - “WASHINGTON - The Federal Reserve will reconsider the average inflation targeting regime it adopted in 2020 and update its policymaking framework now that the economy has entered an era of higher long term interest rates and potentially more volatile inflation, Chair Jerome Powell said Thursday.”
- "Higher real rates may also reflect the possibility that inflation could be more volatile going forward than in the inter-crisis period of the 2010s. We may be entering a period of more frequent, and potentially more persistent, supply shocks — a difficult challenge for the economy and for central banks."
- The 10-year Yield could not maintain its foothold above 4.5%. A sustained break above this level could see another round of selling targeting the 4.75% area. Support now seen back towards 4.35/40% where supply should now be seen.
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US TSYS: Relief Rally Extends
TYM5 re-opens at 111-01+, -0-01 from closing levels in today's Asia-Pac session.
- The US 10-year yield ranged from 4.3039% to 4.4051% on Tuesday, closing near the lows around 4.33%, after US tsys found further relief heading into a long weekend.
- The Empire manufacturing survey improved by more than expected in April to -8.1 (cons -13.5) after a weak -20.0 in March although forward-looking aspects in particular make for a sour reading.
- US tsys were supported in the US session as Deputy Treasury Secretary Michael Faulkner said officials are discussing a move to loosen bank regulations and allow lenders to keep more Treasuries on their balance sheets.
- The market will be relieved to see US yields finally get some reprieve. The next level of support for the 10-year yield is around 4.25/30%, expect some supply to return down there.
- The Fed’s Cook will speaks Alumni Event shortly.
AUSSIE 3-YEAR TECHS: (M5) Within Range of Highs
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.650 @ 15:45 GMT Apr 15
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures ripped to new contract highs again to begin last week - clearing resistance on the continuation contract. The rally has taken out resistance at 96.730, the Sep 17 ‘24 high. On the downside, any reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
NEW ZEALAND: Whole Milk Powder Prices Back Close To 2025 Highs
Overnight, the whole milk powder auction saw the average price rise to $4171/Mt from $4062/MT at the previous auction. This was a 2.7% increase from the early April result, with auctions run twice per month. In level terms we are back close to earlier 2025 highs. Cycle highs in early 2022 were just above $4750. BBG noted GDT's weighted average price for all milk products was $4,385 a ton, a +3% increase.
- This is supportive for NZ's terms of trade backdrop. The chart below shows the average auction price for whole milk powder against the Citi terms of trade proxy for NZ.
Fig 1: Whole Milk Power Auction Result Versus Citi NZD Terms of Trade Proxy
Source: Citi/MNI - Market News/Bloomberg
