AUSSIE BONDS: Cheaper After Employment Beat
ACGBs (YM -9.0 & XM -9.5) are cheaper and near Sydney session lows after the release of stronger-than-expected employment data.
- Employment in April printed significantly higher than expected at +89k, but the unemployment rate remained at 4.1% as the participation rate rose to 67.1%. The strength was in both full-time and part-time jobs.
- Full-time employment rose 59,477 m/m versus a revised +12,200 in March, while Part-time employment rose 29,473 m/m versus a revised +24,200 in March.
- Cash US tsys are little changed in today's Asia-Pac session after yesterday's heavy session. Today's US calendar will see a heavy round of economic data: Retail Sales, PPI, Weekly Claims, Industrial Production and Capacity Utilisation.
- Cash ACGBs are 2-3bps cheaper after the data and 9-10bps cheaper on the day. The 3/10 curve is slightly steeper with the AU-US 10-year yield differential at +4bps.
- The bills strip has extended its bear-steepened, with pricing -5 to -11.
- RBA-dated OIS pricing is 1-4bps firmer across meetings after the data. A 25bp rate cut in May is given a 89% probability (95% pre-data), with a cumulative 73bps (76bps pre-data) of easing priced by year-end.
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FOREX: NZD and AUD Outperforming, Kiwi Above 200-day MA
NZD and AUD both outperforming in the G10 space, led by the Kiwi. Both currencies are through their respective highs from Monday, albeit the NZD more convincingly. NZD/USD was last near 0.5900, above its simple 200-day MA, see the chart below. AUD/USD was above 0.6340, with headlines from the RBA Minutes crossing. The RBA is maintaining a cautious tone around the timing further rate cuts.
- Generally green Asia Pac equity trends are helping the Kiwi and AUD, with the MSCI Asia Pac index up 1%, while US equity futures are back close to flat. We were down close to 0.50% at one stage in the first part of trade.
Fig 1: NZD/USD Testing Above Simple 200-day MA
Source: MNI - Market News/Bloomberg
CHINA: Central Bank Drains Liquidity during OMO
- The PBOC issued CNY164.5bn of 7-day reverse repo at 1.5% during this morning’s operation.
- Today’s maturities CNY167.4bn
- Net liquidity withdrawal CNY2.9bn.
- The PBOC monitors and maintains liquidity through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.51%, from 1.70% yesterday.
- The China Overnight interbank repo rate is at 1.65%, from 1.50% yesterday.
- The China 7-day interbank repo rate is at 1.72%, from 1.70% yesterday.
STIR: RBA Dated OIS Pricing Softer Ahead Of RBA Minutes (April)
RBA-dated OIS pricing is flat to 4bps softer across meetings today.
- A 50bp rate cut in May is given a 39% probability, with a cumulative 121bps of easing priced by year-end.
Figure 1: RBA-Dated OIS – Today Vs. Yesterday
Source: MNI – Market News / Bloomberg
