AUSSIE BONDS: AUCTION PREVIEW: ACGB Jun-31 Supply Due

The Australian Office of Financial Management (AOFM) will today sell A$1000mn of the 3.75% 21 April 2037 bond. The line was last sold on 26 February 2025 for A$800mn. The sale drew an average yield of 4.4666%, at a high yield of 4.4675% and was covered 3.6688x. There were 41 bidders, 12 of which were successful and 4 were allocated in full.

• This week's ACGB supply is larger than the recent average weekly issuance of $1500mn, with A$300mn of the 4.75% 21 June 2054 bond sold yesterday and A$700mn of the 2.75% 21 November 2029 bond due on Friday.
• According to the Budget 2025-26 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds by tender is expected to be between $2 billion and $3 billion (additional issuance by syndication may be considered).
• For 2024-25, issuance of Treasury Bonds has been revised to around $100 billion, including around $2 billion of Green Treasury Bonds. Treasury-Indexed Bond issuance will be around $3 billion.
• Results are due at 0200 BST / 1100 AEST.

The ESM5 had an overnight range of 5605 - 5671.75, Asia is currently trading 5665. The market traded heavily for most of the overnight session, but the Asian session has started positively as news that US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with China's "lead representative on economic matters" later this week in Switzerland, according to statements released Tuesday.(MNI Policy team)

• From the China side: "*CHINA DECIDES TO TALK TO US AFTER GLOBAL, CHINA INTEREST" - BBG,"*CHINA SAYS ANY TALKS HAVE TO BE EQUAL, BENEFIT EACH OTHER" - BBG.
• The Stock market has seemed to price in a lot of the recent positive sentiment. The reality still feels a little way off with tariffs still high and trade deals not yet finding a resolution. The market will need to start seeing some specifics on these deals this week, and will be hoping the meeting between the US and China bears some fruit.
• “The UK and the US are set to sign a trade deal this week, the FT reported. The UK also agreed to a pact with India.”(per BBG)
• The FOMC on Wednesday will be very important for markets, as traders start to align their views to be more inline with the Fed and have been reducing rate cut expectations. This implies the Fed Put for stocks to be a lot lower from the current market.
• The SPX has had a big bounce from its lows on 4800 handle, but we are approaching some key resistance between 5600-5800, the longer-term sellers should be active around here.

There were some tentative signs in the Q1 labour market data that there is some stabilisation but at weak levels. There was a 0.1% q/q rise in employment driven by a 2.2% q/q jump in part-timers, indicating a cautionary move back into hiring. While the unemployment rate was stable at 5.1%, better than consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus the data is close enough to what the RBNZ expected in February and another 25bp rate cut on May 28 remains likely.

• Wage inflation slowed with the labour cost index rising 0.5% q/q, the slowest quarterly rate in four years, bringing the annual pace down to 2.9% from 3.3%, the lowest since Q4 2021. Private sector wages rose 0.4% q/q after 0.8% q/q in Q1 2024. 

NZ wages y/y%

• The RBNZ should be reassured that wages have adjusted to the lower inflation environment and spare capacity in the labour market.
• While part-time employment rose, full-time fell 0.5% q/q to be down 1.9% y/y. This is also reflected in the 0.3%q/q & 2.9% y/y drop in hours worked and the 0.2pp pickup in the underutilisation rate to 12.3%. While the labour market may have reached a turning point, both of these series show that it remains weak.
• The number of unemployed was flat in Q1 but still up 16.4% y/y, but this was the lowest quarterly change since Q2 2022. The number of people who say there isn’t enough work available rose 26.3% y/y, according to Statistics NZ.

NZ employment y/y%