AUSSIE BONDS: ACGB Mar-36 Auction Result

EXECUTIVE SUMMARY

• The Bank of Japan (BoJ) is scheduled to hold its Monetary Policy Meeting (MPM) on April 30–May 1, during which it will also release its latest Outlook Report. The BoJ is widely expected to leave its benchmark interest rate unchanged at 0.5%.
• This decision comes amid a complicated economic backdrop: while Tokyo’s core inflation rose to 3.4% in April — its highest level in two years, driven by higher food prices and reduced energy subsidies — risks to economic growth are increasing.
• Given the significant shifts in external conditions, particularly the U.S. tariff policy changes since the last MPM in March, the BoJ is likely to adopt a cautious, wait-and-see stance at this meeting.
• Looking ahead, most analysts believe that the next interest rate hike will not occur before October 2025 at the earliest.
• As for the BoJ's Outlook Report, it is unlikely that the Bank will dramatically alter its baseline scenario. That said, the BoJ is expected to revise down its economic and inflation forecasts for the fiscal year 2025.
• Governor Ueda’s upcoming press conference is expected to attract considerable attention, especially regarding how the recent external shocks might influence the BoJ’s economic and inflation projections and future monetary policy.

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This morning the market might be a little disappointed to not get anything concrete from President Trump's speech. Microsoft and Meta will headline earnings on Wednesday, this morning Super Micro tumbled on preliminary third-quarter sales that were well short of estimates, a sign its comeback plan has been slow to gain traction. Snap plunged after omitting its sales guidance for the current quarter and warning of headwinds in advertising. MNI Aust Economists - There are high correlations between NZ and Australian CPI data and given NZ’s Q1 has already been released, Australia may see a pickup in goods inflation, while sticky services may moderate. While the RBA prefers quarterly CPI data, the January/February trimmed mean outcomes signal that it may have returned to the 2-3% band in Q1. Headline will continue to be impacted by government electricity rebates meaning that the focus remains on core.

• EUR/AUD - Overnight range 1.7725 - 1.7888. Asia is trading around 1.7830, support is seen in the 1.7600/7700 area.
• GBP/AUD - Overnight range 2.0863 - 2.1030. Asia is trading back around 2.0995. Good support around 2.0600/2.0700 continues to hold, the market is now attempting to push higher from this base. 
• AUD/JPY - Overnight range 90.59 - 91.57, Asia is trading around 98.85. AUD/JPY failed once more towards 92.00 drifting back towards its recent support. Price action is interesting considering how well stocks held up.
• AUD/NZD -  Overnight range 1.0744 - 1.0775, the cross is dealing in Asia around 1.0764. The cross has finally seemed to find some support towards 1.0650, bounces back towards 1.0800/50 should find supply.

Fig 1: GBP/AUD spot Hourly Chart

Source: MNI - Market News/Bloomberg

European gas prices fell 2.2% to EUR 31.70 on Tuesday and only slightly off the intraday low of EUR 31.20. They are now down around 22% in April, and flashing oversold, driven by not only the end of the winter but also concerns over the impact of US protectionism on global energy demand. Uncertainty remains over the progress of US trade negotiations especially with China, which it continues to deny are taking place. 

• The sharp fall in gas prices in April in addition to warmer weather has helped the outlook for Europe’s ability to refill storage ahead of next winter. Current weak demand from Asia has also contributed to increased LNG shipments to Europe. However, the region remains vulnerable to unexpected outages and a heatwave, particularly in Asia.
• Scheduled Norwegian maintenance has taken place this week.
• US natural gas rose 1.1% to $3.38 after reaching $3.46 earlier in the session, but it is still down over 20% this month which is part of the shoulder season with little demand for either cooling or heating. The rally was driven by unwinding of oversold positions as forecasts for the eastern and southern US signalled cooler weather, according to the Commodity Weather Group.