BONDS: CORRECT: NZGBS: Bearish Bias To Start a Heavy Data Week
Friday’s tick higher in U.S. Tsy yields has applied some pressure to NZGBs in early Monday trade, with the major benchmarks running 2.0-3.5bp cheaper as a result, while there is some modest bear steepening in play.
- Swap rate moves have been a little more pronounced, with the major benchmarks on that curve running 4-5bp higher, once again steepening, resulting in a wider start for swap spreads.
- The major short-dated OIS measures are little changed on the day, with just over 65bp of tightening priced for the Feb ’23 meeting and a terminal OCR of ~5.40% eyed.
- Weekend news flow saw PM Ardern’s ruling Labour Party lose a by-election, and therefore a seat in parliament, pointing to (previously documented) headwinds in next year’s general election.
- Fiscally, there will be increased spending in public transport in Auckland, although the fresh investment (NZ$200mn) should be inconsequential for markets.
- NZ net migration data has been and gone, but that isn’t a market mover. Macro headline flow will take focus from here, with continued regional (and indeed global) eyes on the COVID situation in China. The latest Japanese BSI survey provides the highlight of the regional economic calendar on Monday, but that shouldn’t move the needle for NZ markets.
- Looking ahead to later this week we have a busy local docket, which includes the HYEFU, Q3 current account and GDP data, the BusinessNZ m’fing PMI, REINZ house price metrics and food price data. Elsewhere, RBNZ Governor Orr will make his latest parliamentary appearance.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USDCAD TECHS: Heading South
- RES 4: 1.3808 High Nov 3
- RES 3: 1.3763 Trendline resistance drawn from the Oct 13 high
- RES 2: 1.3571 High Nov 10
- RES 1: 1.3490 50-day EMA
- PRICE: 1.3266 @ 15:58 GMT Nov 11
- SUP 1: 1.3257 Low Nov 11
- SUP 2: 1.3205 61.8% retracement of the Aug 11 - Oct 13 rally
- SUP 3: 1.3139 Low Sep 14
- SUP 4: 1.3023 76.4% retracement of the Aug 11 - Oct 13 rally
USDCAD maintains a bearish theme and Thursday’s sell-off resulted in a new multi-month low. This tilts the balance further in favour of bears. A continuation lower signals scope for a test of 1.3205, a Fibonacci retracement. On the upside, key short-term resistance has been defined at 1.3571, Thursday’s high.
US TSYS: Tsys Weaker, But Near Highs, Dec Step-Down Still Alive
Still weaker, Tsys near top end of session (and overnight range, for that matter) amid two-way positioning ahead the weekend. Light volumes (TYZ2<650k) due to Veterans Day/bank holiday despite full session hours on screen.
- Tsys pared back a small portion of Thu's post-CPI rally, opening moderately lower Friday. Markets still digesting the Oct CPI data: An unexpectedly softer U.S. CPI report for October paints a rosier picture of moderating inflation than is likely the case, Atlanta Fed economist Brent Meyer told MNI.
- Roughly 60% of the CPI basket is still rising at rates above 5%, and alternative measures of underlying inflation remain "very elevated, reflecting broad-based price pressure," he said.
- Little react to preliminary November reading of consumer sentiment from the University of Michigan of 54.7 vs. 59.5 est. Rates and equities gradually pared losses (stocks posting gains in the second half) as participants square up ahead the weekend, slow start to next week.
- Fed Gov Waller kicks things off Sunday evening from Australia. PPI data on Tuesday. Tsy coupon supply starts Wednesday w/ $15B 20Y Bond, 10Y TIPS re-open on Thursday.
AUDUSD TECHS: Northbound
- RES 4: 0.6800 Round number resistance
- RES 3: 0.6768 61.8% retracement of the Aug 11 - Oct 13 downleg
- RES 2: 0.6705 High Sep 21
- RES 1: 0.6695 High Nov 11
- PRICE: 0.6638 @ 15:55 GMT Nov 11
- SUP 1: 0.6514/0.6387 50-day EMA / Low Nov 10
- SUP 2: 0.6272 Low Nov 3 and a key support
- SUP 3: 0.6210/6170 Low Oct 21 / 13 and the bear trigger
- SUP 4: 0.6133 1.382 proj of the Apr 5 - May 12 - Jun 3 price swing
AUDUSD extended gains into the Friday close, confirming the clear break of the 50-day EMA. This strengthens bullish conditions and signals scope for an extension of the bull cycle that started mid-October. Markets have also cleared 0.6682, the Jul 14 low and a previous breakout level. Further out, scope is seen for a climb towards 0.6768, a Fibonacci retracement level. Firm short-term support has been defined at 0.6387, Thursday’s low.
