INDONESIA: Consumer Unfazed by Market Weakness

• As equities head lower again today, bond futures are up across all maturities.
• The 10YR bond future is up +.13 at 109.07 as it trades further away from the nearest moving average; the merged 20-day and 50-day EMA of 108.18.
• The 2YR bond future is up+0.03 at 102.63, as it breaks back above all major moving averages with today’s move.  Its nearest moving average is the 100-day EMA at 102.60.
• China’s 10YR government bond  yield is declining further, down -2bps at 1.64%

• AUD/USD - 650m at 0.5975, 280m between 0.6050/55 Exp 09 April, 270m 0.5985, 120m 0.6000 Exp 10 April
• USD/JPY - 900m between 143.00 - 144.00, 400m at 145.00, 400m at 146.00, 1.3b 146.50 - 147.00 Exp 09 April, 
• NZD/USD - 300m at 0.5475, 474m at 0.5605, Exp 10 April

USD/JPY 1 week expiry report

Source: MNI - Market News/Bloomberg

The RBNZ cut rates 25bp to 3.5% as was widely projected, due to significant spare capacity and a weaker outlook from “global trade policy” which should result in inflation staying close to the target mid-point. It also said that the economy had broadly developed as it expected in February when it forecast 50bp of easing in Q2. It sees “scope’ for further easing if “appropriate” and will be determined by “the outlook for inflationary pressure over the medium term”. At this stage further easing in May is likely, but size is less clear.

• “On balance” US tariffs are a downside risk to NZ growth and CPI inflation. Most of the MPC believed that trade policy announcements shifted risk around NZ’s inflation outlook to the downside, but some thought that they had increased uncertainty and as such risks “remain balanced at this stage”.
• It also noted that the recent weakening of the NZD would “help to cushion the immediate effect” for lower demand for NZ exports. It added that lower oil prices would not only reduce NZ inflation but also “support domestic consumption”. WTI is down another 3.5% today to be almost 20% lower in April.
• Tariffs will take time to be felt by the global economy and the possibility of further changes to what has only been recently announced adds to the uncertainty of their effect. The response of global supply chains is also unclear.
• The RBNZ observed that higher export prices and weaker kiwi had helped to support primary producers and add to NZ growth but private consumption and residential investment remain weak. However, the full effect of monetary easing to date is yet to be felt.