SWAPS: Citi Cautious On Idea Of Further EUR Steepening In Immediate Term
Citi identify several risks to existing steepener positioning on the EUR swaps curve (with a particular focus on 30s50s):
- “While originally around half of the total €1600bn assets (at end-2024) were targeted to transition each on 1 January 2026 and 1 January 2027, the DNB’s Q4 survey showed a shift later. Recently PME has shifted its transition from 1 January 2026 to 1 January 2027 and PostNL to April 2026, due to administrative difficulties. This could delay/stagger these unwinds”.
- “Any delay in transition could also be an incentive for funds with policy funding ratio under 120%. They could wait for a recovery in funding ratios from fiscal pressure on global long-end swaps to then add interest rate hedges at cheap levels”.
- Overall, they “suspect that any further 30s50s steepening due to this transition might only happen later in the year when more clarity emerges, for instance, from the next DNB survey, potentially published in July”.
- However, they stress that “the asymmetric long-end exposure to front-end swings has become more compelling over the last six months - which we believe supports 30s50s steepeners from a broader macro standpoint”.
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FOREX: US Dollar Trends Lower Through APAC Session, Broad Based G10 Gains
The US dollar sell off has continued through today’s APAC sell off with the USD BBDXY now down 0.8% and close to its intraday low, as confidence in the US as a safe haven wanes following uncertainty over its trade policy and now President Trump’s interference with the Fed. Unusually this has coincided with US equity futures deeply in negative territory. Flight-to-quality flows have seen the yen, euro and Swiss franc all strengthen by at least 1% against the greenback but also kiwi, which is usually risk sensitive.
- EURUSD is up 1.2% to 1.1530, close to the intraday high and exceeding 1.1500 later in the session. This is its highest level since November 2021. It has broken above resistance at 1.1495 opening up 1.1555.
- GBPUSD is 0.7% higher at 1.3392 but EURGBP is +0.4% to 0.8609, still below initial resistance, with breaks above 0.8610 short lived.
- USDCHF is down 1.0% to 0.8084 after a trough of 0.8069. EURCHF has range traded but is currently up 0.2% to 0.9319.
- USDJPY is 1.1% lower at 140.69, close to the intraday low of 140.62. The yen is now its strongest against the dollar since July 2023. EURJPY is up 0.1% to 162.19 off today’s trough of 161.65. It remains below initial resistance at 163.55.
- Equities are mixed with the S&P e-mini down 0.7% and Nikkei -1.2% but CSI 300 up 0.3% and Nifty 50 +1.1%. Oil prices lower with Brent -1.4% to $67.01/bbl. Copper is up 0.4% and iron ore is around $99/t.
- Later the Fed’s Goolsbee appears and the US March leading index is released. Europe remains closed.
FOREX: Kiwi Outperforming As US Dollar Sell Off Continues
Kiwi has been one of the strongest performers in today’s US dollar sell off. NZDUSD is up 1.2% to 0.6006, above 60c for the first time since November. It reached a high of 0.6007. With US equity futures selling off, Aussie has underperformed much of the G10 but is still stronger on the day. The BBDXY USD index is down 0.8%.
- AUDUSD is up 0.8% to 0.6425 after a high of 0.6427, the highest since December, above resistance at 0.6392 & 0.6409(key resistance), and approaching 0.6428. A break above this level would open up 0.6471. It has spent the latter part of the session above 64c.
- As it is underperforming the rest of the G10 except for Canada, the Aussie crosses are all weaker. AUDNZD is down 0.4% to 1.0697 after a trough of 1.0694, lowest since March.
- With the euro outperforming, AUDEUR is down 0.4% to 0.5573 but off the intraday low of 0.5555, the lowest since March 2020. AUDGBP has recovered from 0.4782 to be down only slightly at 0.4797.
- On Tuesday, NZ March trade data and preliminary April Australian S&P Global PMIs are released.
INDONESIA: Trade Surplus Widens In March, Highly Exposed To China
Indonesia’s March trade surplus widened to $4.33bn, highest since November, from $3.117bn when a narrowing had been forecast. Exports were stronger than expected rising 3.2% y/y when a 2.4% fall had been expected. Imports grew 5.3% y/y up from 2.3% in February but moderately slower than forecast. The data are too early to show any impact from the US’ increased trade protectionism with the universal 10% tariff not implemented until this month.
Indonesia merchandise trade balance US$mn vs 3-month ma
- USDIDR is around 16804 today after a high of 16840 on Thursday. The fall in the pair is due to broad-based US dollar weakness (BBDXY USD index -0.7%) following comments from US President Trump that the Fed should cut rates and threats that he may replace Chairman Powell.
- The US administration announced a 32% duty on imports from Indonesia as part of the reciprocal tariff package. At this point, it has been delayed and Indonesia hasn’t retaliated. It expects a deal with the US within 60 days. Indonesia is highly exposed to China though with 24% of 2024 exports going there, while 10.6% were shipped to the US. Thus it is highly vulnerable to an unresolved US-China trade war.
- March non-oil & gas annual export growth was driven by agriculture +32.8% y/y and manufacturing +9% y/y, with shipments to all major destinations posting positive annual growth, except to India.
- Q1 nominal exports rose 6.9% y/y and imports around 1.5% y/y.
Indonesia goods exports vs imports y/y% 3-month ma
Source: MNI - Market News/LSEG
