US TSYS: 10-Year Yield Fails Above 4.5% At First Attempt

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.

• 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. 

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