MALAYSIA: BNM on Hold Surprises with SRR Cut

TYM5 is 111-17+, +0-02+ from closing levels in today's Asia-Pac session. 

• Overnight, US tsys finished mostly weaker as tariff headlines continued to rattle markets, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high).
• The long end was hit hard with the 30-year cheapening by 15bps. The 10-year was 11bps higher at 4.29%, while the 2-year yield richened 4bps to 3.73% on haven demand and rate cut bets.
• Trump officials confirmed 104% added tariff on China went into effect at noon, with WH press sec Leavitt adding that additional tariffs are to be collected starting tomorrow.
• US stocks failed to hold onto midmorning gains (SPX e-minis slipped below 5,000 after marking a session high of 5305.25 at midmorning).
• Heavy short-end buying partially swap-tied as spreads narrowed sharply, projected rate cut pricing rebounded vs. priors - back to pricing in a full point by year-end. Current levels vs. early morning (*) as follows: May'25 at -14bp (-8.2bp), Jun'25 at -38.2bp (-28.3bp), Jul'25 at -61.6bp (-49.1bp), Sep'25 -79.3bp (-65.7bp).

In local morning trade, NZGBs have bear-steepened, with benchmark yields 2-6bps higher, ahead of today’s RBNZ Policy Decision.  

• Overnight, US tsys finished mostly weaker as tariff headlines continued to rattle markets, with curves twisting to the steepest levels in over three years (2s10s tap 55.157 high).
• Swap rates are 1bp lower to 5bps higher, with the 2s10s curve steeper.
• The RBNZ is unanimously expected to deliver a 25bp cut to 3.50% and maintain its easing bias.
• Data have remained soft but still signal a gradual recovery, so the MPC is likely to ease in line with its February guidance. It is also the first meeting since Governor Orr unexpectedly resigned, and there is no reason to deviate from the message at this stage.
• There is likely to be little direct impact on NZ from the US’ 10% tariff on its exports, even though it is NZ’s second largest destination. However, the indirect impact of the 54% US tariff on imports from China is a significant concern, NZ’s largest trading partner.  (See MNI’s RBNZ Preview here)
• RBNZ dated OIS pricing is flat to 3bps softer across meetings. 28bps of easing is priced for today, with a cumulative 101bps by November 2025.

• Gold’s uncertainty continued overnight with bullion finishing virtually where it started the day.  
• As tariff headlines abounded, earlier gains that gold had eked out were erased, finishing at US$2,984.58
• The White House has said that it will be pursuing tariffs of up to 104% on Chinese goods whilst Chinese Premier Li said that his country had ‘ample tools’ to “fully offset” the tariffs.
• Whilst gold enjoys ‘safe haven’ status amongst investors, in times of high volatility investors seek liquidity, something gold does not exhibit.
• Gold has traded below the 20-day EMA of $3,021.80 and now sits at the mid-point between the 20-day EMA and the 50-day EMA at $2,948.16
• It has not traded below the 50-day EMA since the start of the year.
• Longer term EMA’s remain upward sloping (bullish momentum) but he 20-day EMA has turned down for the first time in 2025.