BONDS: Bull-Steepener, UE Unchanged, RBNZ's FSR Published
May-07 04:46
NZGBs closed showing a bull-steepener, with benchmark yields 5-7bps lower, following today’s labour market data.
- However, with the NZ-US and NZ-AU 10-year yield differentials little changed on the day, the data's impact appears to have been limited.
- The Q1 labour market data shows some stabilisation, but at weak levels.
- While the unemployment rate was stable at 5.1%, better than the 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.
- The RBNZ warned that financial stability risks have risen over the past six months amid global uncertainties and said banks have enough buffers to cushion the economy should things get worse, according to its FSR report.
- Swap rates closed 4-5bps lower.
- RBNZ dated OIS pricing closed slightly softer across meetings. 26bps of easing is priced for May, with a cumulative 77bps by November 2025.
- Tomorrow, the local calendar will see the NZ Government's 9-Month Financial Statements.
- Tomorrow, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 2.75% May-51 bond.
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BONDS: NZGBS: Closed Well Off Bests With Twist-Steepener, RBNZ Decision On Wed
Apr-07 04:40
NZGBs closed mixed, well off session bests, with the 2/10 curve steeper. Benchmark yields finished 3bps lower to 4bps higher after being 9-12bps lower earlier in the session.
- Moreover, the NZ-US and NZ-AU 10-year yield differentials closed 7-8bps wider. At +44bps, the NZ-US differential is at its widest since October last year.
- Markets continue to be hit by the ongoing trade-related pullback in risk appetite, although some have begun to stabilise at lower levels due to selling fatigue and profit-taking. US equity futures are down sharply but also off their intraday lows.
- Some Asian countries have said today that they will take steps to stabilise markets if needed and Japan has said it will speak with the US.
- Swap rates closed 3-9bps lower, with the 2s10s curve steeper.
- "The RBNZ Shadow Board is in favour of lowering the OCR by 25bps to 3.50% this week." (per BBG)
- RBNZ dated OIS has 30bps of easing priced for April, with a cumulative 101bps by November 2025.
- Tomorrow, the local calendar will see the NZIER Business Opinion Survey.
- On Thursday, the NZ Treasury plans to sell NZ$275mn of the 0.25% May-28 bond and NZ$225mn of the 4.25% May-34 bond.
BUND TECHS: (M5) Bull Cycle Still In Play
Apr-07 04:33
- RES 4: 132.80 High Feb 5
- RES 3: 132.56 High Feb 28 and a key resistance
- RES 2: 132.04 High Mar 3
- RES 1: 131.48 High Apr 4
- PRICE: 130.80 @ 05:17 BST Apr 7
- SUP 1: 129.78 Low Apr 4
- SUP 2: 129.02/128.47 20-day EMA / Low Mar 28
- SUP 3: 127.74 Low Mar 25 and a key short-term support
- SUP 4: 127.20 Low Mar 17
A bull cycle in Bund futures remains in play and the contract is holding on to the bulk of its recent gains. Fresh short-term cycle highs last week signal scope for a continuation of the uptrend. The contract has cleared 131.14, the 76.4% retracement of the Feb 28 - Mar 11 bear leg. Clearance of this level strengthens the bullish condition and opens 132.56, the Feb 28 high. Initial firm support to watch lies at 129.02, the 20-day EMA.
JGBS: Futures Holding Sharply Higher At Lunch But Off Bests
Apr-07 04:06
At the Tokyo lunch break, JGB futures remain sharply higher at 142.19, +53 compared to settlement levels, but well off session bests (142.95).
- “Details in Japan’s February labor cash earnings contained bad news for the Bank of Japan — the pace of increase in base pay for full-time workers on a same-sample basis — the central bank’s preferred gauge — slowed sharply and undershot the consensus forecast.” (per BBG Economics)
- The local calendar will also see Coincident & Leading Indices data later.
- Markets continue to be hit by the ongoing trade-related pullback in risk appetite, although some have begun to stabilise at lower levels due to selling fatigue and profit-taking, including risk-sensitive AUD and oil prices. US equity futures are down sharply but also off their intraday lows.
- Some Asian countries have said today that they will take steps to stabilise markets if needed and Japan has said it will speak with the US.
- Nevertheless, the market are continuing to digest the implications Friday’s unveiling of a 34% duty on all US imports by China.
- Cash JGBs are flat to 11bps richer across benchmarks out to the 30-year (40-year flat), with the belly leading. The benchmark 10-year yield is 9.7bps lower at 1.120% versus the cycle high of 1.596%.
- Swap rates are 6-11bps lower. Swap spreads are mixed.
