AUSSIE BONDS: Cheaper Ahead of US CPI, AU-US 10Y Diff Near Bottom Of Range
Jun-11 04:44
ACGBs (YM -5.0 & XM -2.0) are weaker after trading in narrow ranges on a local-data-light session.
- Cash US tsys are little changed in today's Asia-Pac session ahead of today's CPI data. Analyst unrounded estimates see core CPI inflation accelerating mildly to 0.27% M/M (median, 0.28% average) in May after 0.24% M/M in April. (See link)
- Focus has also been on US-China trade talks, with headlines from London crossing earlier. The market reaction has been fairly muted, with the main outcome being agreement to move forward with what was agreed at the Geneva talks in May (although both US and Chinese leaders need to sign off on implementation).
- Cash ACGBs are 2-4bps cheaper with a flatter curve and the AU-US 10-year yield differential at -20bps.
- The bills strip has cheapened, with pricing -2 to -3.
- RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in July is given a 79% probability, with a cumulative 72bps of easing priced by year-end.
- Tomorrow, the local calendar will be empty apart from a speech from RBA Jacobs, Head of Domestic Markets Department – Australia’s Bond Market in a Volatile World – at the Australian Government Fixed Income Forum, Tokyo.
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BONDS: NZGBS: Closed At Cheaps With Focus On Trade Deals
May-12 04:42
NZGBs closed at session cheaps, with benchmark yields 3-4bps higher. NZ-US and NZ-AU 10-year yield differentials were little changed.
- With the domestic calendar empty, attention was focused abroad.
- Cash US tsys are trading 2-3bps cheaper in today's Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- “The Reserve Bank of New Zealand (RBNZ) is "well-placed" to offset the impact of the projected lower discretionary fiscal spending on aggregate demand as the effect of the government's fiscal consolidation is likely to be limited at the macroeconomic level, ANZ Research said in a budget preview report on Monday.” (per MTN via BBG)
- Swap rates closed 3-4bps higher.
- RBNZ dated OIS pricing closed slightly firmer across meetings. 25ps of easing is priced for May, with a cumulative 75bps by November 2025.
- Tomorrow, the local calendar will be empty ahead of Card Spending and Net Migration data on Wednesday.
STIR: RBA Dated OIS Dec-25 Pricing 25bps Firmer Than Pre-CPI Level
May-12 04:27
RBA-dated OIS pricing is 2-24bps firmer across meetings than levels before the release of Q1 CPI data on April 30.
- Q1 headline and underlying inflation printed 0.1pp higher than expected, but the trimmed mean at 2.9% y/y was below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
- The data was close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
- A 50bp rate cut in May is given a 2% probability (10% before the CPI data), with a cumulative 93bps (117bps before) of easing priced by year-end.
Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI
Source: MNI - Market News / Bloomberg
GOLD: Gold Falls Again as Optimism Grows
May-12 04:12
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
