AUSSIE BONDS: ACGB Nov-31 Supply Faces Lower Yield But Steeper Curve

TYU5 is trading 110-25+, down 0-01+ from its close. 

• The US 2-year yield opens around 3.947%, unchanged from its close.
• The US 10-year yield opens around 4.395%, up 0.01 from its close.
• (Bloomberg) -- JPMorgan’s Treasury Client Survey for the week ended June 16 showed shorts drop 3ppts into neutral with longs unchanged. The all-client survey shows the most net longs and the fewest outright shorts since May 5.
• “Interest-rate swap spreads widened after the Federal Reserve announced it will hold a meeting June 25 to discuss changes to the supplementary leverage ratio that are expected to boost Treasuries’ relative appeal.”(BBG)
• The 10-year yield bounced strongly off its 4.30/35% support, this area needs to hold if yields are to move higher. The range looks to be 4.30% - 4.60% for now a break either side would provide a clearer direction. Lots for the market to digest as things heat up in the middle east and we approach the FOMC.
• Data/Events: MBA Mortgage Applications, Housing starts, Initial Jobless Claims, FOMC

The Q1 non-seasonally adjusted current account deficit narrowed substantially to $2.32bn from a downwardly-revised $6.80bn but seasonally adjusted it was similar to Q4 at $5.55bn. This brought it to 5.7% of GDP down from 6.1%, the lowest since Q3 2021 and 3.5pp less than the Q4 2022 peak. The trade deficit narrowed to $1.22bn from $1.63bn, the lowest since Covid-impacted Q2 2021, due to a strong pickup in goods exports. Robust shipments in Q1 are likely to support GDP growth when it is released on Thursday.

NZ current account % GDP

Source: MNI - Market News/LSEG

• Goods exports rose 11.9% q/q in Q1 to be up 18% y/y driven by agricultural products and higher prices for dairy and meat. Imports rose 5.5% q/q to be up 6% y/y driven by intermediate items including processed fuels. Durable consumer goods also saw a robust rise.
• The services balance returned to a deficit in Q1 after a small surplus in Q4, as exports fell 5.9% q/q due to lower visitor expenditure while imports rose 2.4% q/q driven by transport services.
• The net international investment liability position narrowed to $212.2bn in Q1 from $213.6bn, as the value of assets fell by less than liabilities due to global market uncertainty.

NZ goods & services exports vs imports y/y%

Source: MNI - Market News/LSEG

• MNI JAPAN APRIL CORE MACHINE ORDERS -9.1% M/M; MAR +13.0%
• JAPAN APRIL MACHINE ORDERS POSTS 1ST M/M DROP IN 3 MONTHS