US TSYS: Cash Open

ACGBs (YM -5.0 & XM +2.5) have twist-flattened after US tsys finished mixed on Tuesday. 

• US curves unwound a large portion of Monday's steepening on Tuesday, with bonds outperforming weaker short-end rates as markets reassessed tariff-tied risks to global trade and the Trump Administration's efforts to meddle with the Federal Reserve's independent policymaking.
• Risk-on sentiment has extended into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence).
• Trump also stated that the final tariff number for China wouldn't be near the current 145%.
• S&P Global Flash PMIs for April have printed.
• Cash ACGBs are 5bps cheaper to 2bps richer with the AU-US 10-year yield differential at -13bps.
• Swap rates are 4bps higher to 2bps lower, with the 3s10s curve flatter.
• The bills strip is cheaper with pricing -5 to -9.
• RBA-dated OIS pricing is 2-8bps firmer across meetings today. A 50bp rate cut in May is given a 13% probability, with a cumulative 115bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will see the AOFM’s planned sale of A$1000mn of the 3.25% 21 April 2029 bond

USD/CNH tracks under 7.3000 in early Wednesday dealings, up around 0.25% in CNH terms versus end Tuesday levels in NY. Headlines crossed from US President Trump earlier that the final tariff on China wouldn't be at 145%. Broader USD sentiment is firmer, with yen off 0.80% against the USD, but so far CNH is outperforming these trends. 

• Spot USD/CNY finished up at 7.3074 on Tuesday, while the CNY CFETS basket tracker ended at 95.70, down a further 0.28%. If current early Wednesday trends persist, with CNH outperforming this broader USD rebound, should see higher basket levels though.
• For USD/CNH technicals, not much has changed. Downside focus is likely to rest with the 50-day EMA, near 7.2885. We haven't been able to sustain breaches of this level in recent weeks. Beyond that lies the 100-day EMA near 7.2740. Highs from last week in the pair rest close to 7.3350.  
• Trump's remarks that the final tariff on China wouldn't be at 145% followed earlier remarks from US Tsy Secretary on Tuesday, who privately told investors the tariff standoff is unsustainable and he expects de-escalation with China.
• The tariff outlook is likely to remain key for CNH sentiment. Earlier on Tuesday the IMF stated its 2025 growth projections for China were cut to 4%. This didn't take into account the full recent tariff escalation though.
• The local data calendar is empty today. 

Oil rallied on Tuesday following increased US sanctions on Iran and better risk sentiment and has continued to trade higher in early APAC trading today following comments from President Trump that he wouldn’t replace Fed Chair Powell and that China’s tariffs wouldn’t finish at the current 145%. The US dollar recovered somewhat from Monday’s fall with the USD index up 0.5%.

• WTI rose 1.8% to $63.54/bbl after reaching $64.36, below initial resistance at $64.49. The benchmark is up another 1.1% to $64.34 today but is still down over 9% this month. The bear trigger is at $54.67.
• Brent is up 2.4% to $67.82/bbl following a high of $68.04 but the move above $68.00 was short lived. The benchmark approached initial resistance at $68.14, 17 April high, but fell short. It continues to trade above the April 9 low though maintaining a more positive short-term tone but the rally remains corrective as the oversold position unwinds. Initial support is at $62.00 and the bear trigger at $58.40. It is now down 9.3% in April.
• Bloomberg reported that there was a significant US crude stock drawdown of 4.57mn barrels last week, according to people familiar with the API data. Products continued their decline with gasoline down 2.18mn and distillate 1.64mn suggesting that demand is robust. The official EIA data is out later today.
• Despite ongoing talks between the US and Iran on its nuclear programme, US actions on Tuesday were tougher against the oil producer with President Trump supporting Israel’s stance on Iran and new US sanctions on an Iranian LPG businessmen and his shipping network for allowing oil exports to avoid sanctions. There will also be stricter enforcement.
• Trump is due to travel to Saudi Arabia, Qatar and UAE in May.