AUSSIE BONDS: Cheaper As Post-RBA Fallout Continues
ACGBs (YM -7.0 & XM -8.0) are weaker and near session cheaps as the fall-out from yesterday’s surprising RBA decision continued.
- (AFR) At least two Labor appointees to the Reserve Bank of Australia monetary policy board, Jenny Wilkinson and Iain Ross, almost certainly voted for an interest rate cut on Tuesday, according to former RBA insiders. Wilkinson is Treasury secretary to Jim Chalmers and Ross is a former union-aligned pay setter. But the identity of the third dissenter in the shock 6-3 decision to hold the cash rate unchanged at 3.85 per cent is more of a mystery.
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s modest sell-off.
- Cash ACGBs are 6-8bps with the AU-US 10-year yield differential at -7bps.
- The bills strip are 3-5bps cheaper.
- RBA-dated OIS pricing is modestly firmer across meetings today after shunting higher yesterday. A 25bp rate cut yesterday was given a 92% probability by the market ahead of the decision. Currently, pricing across meetings is 10-19bps firmer than yesterday’s pre-RBA levels. A cumulative 60bps of easing is priced by year-end (based on an effective cash rate of 3.84%) versus 75bps before the RBA decision.
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CHINA DATA: Exports & Imports Below Forecasts, Exports To US Fall Further
China's May trade data saw recent trends broadly maintained, while outcomes were slightly below market expectations. Exports were 4.8%y/y, against a 6.0% forecast and 8.1% prior. Imports fell -3.4%y/y (versus -0.8% forecast and -0.2% prior). This left the trade surplus at $103.22bn, above April's outcome ($96.18bn) and the market consensus of $101.1bn.
- Trade with the US remains a focus point, with exports now down to $28.82bn, versus levels close to $49bn at the end of last year. This a -34%y/y outcome, per Bloomberg. Exports with other parts of Asia were mostly down a touch in May.
- Offset came from exports to the EU, up to $49.50bn from $46.71bn prior. Most individual EU countries saw a rise. Exports to the UK were yup to $7.46bn from $6.92bn and to Brazil, $6.45bn from $5.72bn.
- The trade surplus with the US eased to $18.01bn, from $20.46bn. To the EU it was steady at $26.62bn from $26.67bn. With parts of Asia, China's trade position was little changed from April levels.
- On the import side, volumes for commodity imports were mostly down, except for soybeans and natural gas. Coal, crude oil and iron ore were all off April levels.
- Focus will be on US-China trade talks alter today in London, although trends still slowed in May in terms of exports to the US, even with lower tariff levels agreed to at the meting in Geneva.
MNI: CHINA MAY EXPORTS +4.8% Y/Y VS MEDIAN +6.0% Y/Y: CUSTOMS
- CHINA MAY EXPORTS +4.8% Y/Y VS MEDIAN +6.0% Y/Y: CUSTOMS
- CHINA MAY IMPORTS -3.4% Y/Y VS MEDIAN -1.0% Y/Y: CUSTOMS
- CHINA MAY TRADE SURPLUS +$103.2 BLN VS MEDIAN +$101.1 BLN
AUD: AUDUSD Stronger & Holding Break Above 65c As Equities Rally
AUDUSD has trended higher so far through today’s APAC session to be up 0.3% to 0.6510 supported by better risk appetite which is driving equities higher following the US’ post-payroll rally, and US yields and the dollar are lower (USD BBDXY -0.2% after Friday’s +0.3%). The pair is approaching resistance at 0.6538.
- AUDJPY has range traded and is currently around 94.06 after a low of 93.97 and a high of 94.24. AUDNZD is flat at 1.0790 off the intraday peak of 1.0803.
- AUDEUR is 0.1% higher at 0.5702 holding a break above 0.5700. AUDGBP is off its high of 0.4807 but is still up 0.1% to 0.4802.
- Equities are rallying with the Nikkei up 1.0% and Hang Seng +1.5% but the S&P e-mini is down 0.2%. The ASX is closed for a holiday. Oil prices are slower lower with WTI around $64.55/bbl. Copper is 0.3% higher and iron ore is off its intraday low to be just over $95/t.
- Later US April wholesale data and May NY Fed 1-yr inflation expectations print. The ECB’s Elderson speaks.
