INDIA: Country wrap: RBI to Cut Next Week
- India’s transition to a delta-based measure of open interest from notional is positive for exchanges, clearing members like Nuvama Wealth and proprietary traders, according to Jefferies. “As planned, SEBI to transition to Delta-based OI limits, new caps on market-wide position limits and other initiatives to better manage the F&O market,” analyst Prakhar Sharma wrote in a note (source BBG)
- RBI Preview: The Reserve Bank of India meets on June 06 to decide the next monetary policy move. At time of writing there is a heavy consensus for a further cut. At the last meeting in April, the RBI cut rates and signalled that more cuts were ahead, as it seeks to boost the sluggish economy in the face of fresh US tariffs. Since that meeting, economic data has shown resilience with PMI's rising very strongly, exports surprising to the upside, industrial production resilient all against a backdrop of moderating inflation. During the last month the RBI has repeatedly provided strong liquidity support to markets, a sign that the transmission mechanism for monetary policy may not be as effective as required. Market consensus is very strongly for a cut with all economists surveyed on BBG advocating a cut and -23bps priced in by the bond market. We align our thinking with consensus and expect a cut and for now and are focused on the RBI liquidity injections in the near term. (source MNI Market News)
- The NIFTY 50 has had a slow week, down just -0.15% today and -0.20% for the week.
- The rupee is stronger today by +0.16% yet down for the week by -0.20%
- Bonds have had a quiet week, ending where they started for the 10YR at 6.25%
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GBPUSD TECHS: Bullish Trend Structure
- RES 4: 1.3605 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 3: 1.3550 High Feb 24 ‘22
- RES 2: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 1: 1.3444 High Apr 28 / 29
- PRICE: 1.3391 @ 06:10 BST Apr 30
- SUP 1: 1.3280 Low Apr 28
- SUP 2: 1.3202 20-day EMA
- SUP 3: 1.3041/3002 Low Apr 14 / 50-day EMA
- SUP 4: 1.2807 Low Apr 10
The trend condition in GBPUSD remains bullish and Monday’s fresh cycle high reinforces current conditions. The move higher highlights a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position too, signalling a dominant uptrend. Sights are on 1.3510, a Fibonacci projection. Support to watch lies at 1.3202, the 20-day EMA.
BOBL TECHS: (M5) Trading Closer To Its Recent Highs
- RES 4: 120.20 High Dec 12 ‘24 (cont)
- RES 3: 120.000 Psychological round number
- RES 2: 119.960 High Apr 7 and the bull trigger
- RES 1: 119.780 High Apr 22
- PRICE: 119.400 @ 05:45 BST Apr 30
- SUP 1: 119.180 Low Apr 23
- SUP 2: 118.996 20-day EMA
- SUP 3: 118.060 Low Apr 10
- SUP 4: 117.680 Low Apr 9 and a key support
Bobl futures are trading closer to their recent highs and a bull cycle remains in play. The steep sell-off between Apr 7 - 9 is considered corrective. The early April rally resulted in a break of key resistance at 119.040, the Feb 28 high, strengthening bullish conditions. The focus is on the 120.000 handle next. Firm support lies at 117.680, the Apr 9 low. The 20-day EMA, an important short-term support, is at 118.996.
AUSSIE BONDS: Modestly Cheaper After CPI Beat, Chance 50bp Cut In May Gone
ACGBs (YM flat & XM +2.0) slightly mixed on the day but 1-4bps cheaper after today’s Q1 CPI data.
- Q1 headline and underlying inflation printed 0.1pp higher than expected but the trimmed mean at 2.9% y/y is below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
- Cash US tsys are slightly mixed in today's Asia-Pac session.
- Cash ACGBs are flat to 2bps richer on the day, with the AU-US 10-year yield differential at flat.
- Swap rates are flat to 4bps lower, with the curve flatter.
- The bills strip has twist-flattened, with pricing -5 to +3.
- The data is close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
- RBA-dated OIS pricing is 2-5bps firmer across meetings after today’s data. A 50bp rate cut in May is given a 3% probability, with a cumulative 112bps of easing priced by year-end.
- Tomorrow, the local calendar will see CoreLogic Home Values, Trade Balance and Q1 Terms of Trade data.
- The AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Friday.
