AUSSIE BONDS: Cheaper, Fedspeak Returns Later Today, Light-Local Calendar,
May-09 04:58
ACGBs (YM -7.0 & XM -5.5) remain cheaper after the overnight lead-in from US tsys.
- Cash US tsys are 1-2bp richer in today's Asia-Pac session after yesterday's heavy session.
- Today, the local calendar has been light apart from the AOFM's sale of Nov-29 bond, which was well received. The cover ratio surged to a strong 5.4143x, up from 4.1286x at the previous auction, while the number of successful bidders fell to just three — highlighting highly concentrated demand.
- Cash ACGBs are 5-6bps cheaper with the AU-US 10-year yield differential -7bps.
- The bills strip has bear-steepened, with pricing -2 to -6.
- RBA-dated OIS pricing is flat to 6bps firmer across meetings today. A 50bp rate cut in May is given a 2% probability, with a cumulative 99bps of easing priced by year-end.
- "The three-year battle to tame Australia's worst inflation surge in four decades has been wearying for the Reserve Bank of Australia. At last, the guns have fallen silent, and a string of interest-rate cuts are being locked and loaded." (DJ via BBG)
- On Monday, the local calendar will be empty.
- Next week, the AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond on Wednesday and A$800mn of the 2.50% 21 May 2030 bond on Friday.
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US TSYS: Haven Demand Under Threat From China Retaliation
Apr-09 04:58
TYM5 is 110-12, +1-02 from closing levels in today's Asia-Pac session.
- Cash US tsys have extended yesterday's decline during the Asia-Pac session. The sell-off reflects growing concerns that China may retaliate against tariffs by offloading US assets, including US tsys.
- Alongside the steepening of the curve, interest-rate swaps have extended their recent extreme outperformance of US tsy securities as traders sought to avoid costs associated with holding bonds.
- Cash US tsys are currently trading 2-17bps cheaper across benchmarks, with the curve steeper.
- Yesterday, Trump officials confirmed the 104% tariff on China went into effect at noon. Concurrently, China vowed to "fight to the end".
- On the local front, the focus turns to the March FOMC minute release at 1400ET today, CPI on Thursday and PPI on Friday morning.
- Reminder, banks kick off the latest earnings cycle this Friday with Bank of New York Mellon, Wells Fargo & Co, JPMorgan Chase and Morgan Stanley reporting.
BOBL TECHS: (M5) Trend Outlook Remains Bullish
Apr-09 04:57
- RES 4: 120.000 Psychological round number
- RES 3: 119.960 High Apr 7
- RES 2: 119.594 76.4% retracement of Monday’s high-low range
- RES 1: 119.368 61.8% retracement of Monday’s high-low range
- PRICE: 119.180 @ 05:42 BST Apr 9
- SUP 1: 118.410/117.971 Low Apr 7 / 20-day EMA
- SUP 2: 117.680 Low Apr 1
- SUP 3: 117.410 Low Mar 27
- SUP 4: 117.080 Low Mar 25 and a key short-term support
Bobl futures have pulled back from their recent highs - a correction. Last week’s gains resulted in a break of key resistance at 119.040, the Feb 28 high. This strengthens bullish conditions and signals scope for a continuation. The focus is on the 120.000 handle next. The contract is overbought, a deeper pullback would allow this condition to unwind. Initial firm support lies at 117.971, the 20-day EMA.
GOLD: Gold Rises Again as Equities Struggle
Apr-09 04:54
- Gold’s few uncertain days may be behind it as the rally began today as equities retreated.
- As tariff headlines abounded and having opened at US$2,984.58 gold rallied in the Asian trading afternoon back above $3,000 to be $3,009.00
- The White House has said that it will be pursuing tariffs of up to 104% on Chinese goods whilst Chinese Premier Li said that his country had ‘ample tools’ to “fully offset” the tariffs.
- Whilst gold enjoys ‘safe haven’ status amongst investors, in times of high volatility investors seek liquidity, something gold does not exhibit.
- Chinese investors put a record 7.6 billion yuan into gold-backed exchange-traded funds last week, seeking safety amid trade war tensions.
- Gold appears to be the only safe haven at present again as even treasuries are getting caught in the cross fire today.
