US TSYS: Curve Bear Steepens On Thursday, NFP In View
TYU3 deals at 110-09+, +0-02, in line with late NY levels.
- Cash tsys finished 1-11bps cheaper across the major benchmarks, the curve bear steepened.
- Recent pressure on Tsys extended through yesterday's session, the latest ISM survey Services Index was a touch softer than expected however the Prices Paid component was at it's highest level in four months.
- Flow-wise several curve steepeners also weighed on the belly and the long end of the curve. 2s10s printed its widest level since late May.
- A ~2.6% rise in WTI as Saudi Arabia prolonged its unilateral production cut by another month and hinted that deeper reductions may be on the way also weighed at the margins.
- FOMC dated OIS remain stable, a terminal rate of 5.40% is seen in November with ~60bps of cuts by June 2024.
- There is a thin docket in Asia today. Further out we have the July NFP report which headlines Friday's session.
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BONDS: NZGBS: Little Changed, Underperforming ACGBs After RBA Pause
In early local trade, NZGBs are unchanged with the markets subdued overnight due to the US holiday. US tsy futures are little changed from the NZ close.
- At yesterday’s local close, the RBA decided to leave the cash rate unchanged at 4.10%, in line with the small majority of economists. The market had been pricing in a 39% chance of a hike in the lead-up to the meeting. ACGBs were drifting cheaper into the decision so the immediate reaction was higher, but only some of those gains have been sustained. The NZ/AU 10-year yield differential sits +2bp versus yesterday’s close.
- Swap rates are flat to 1bp cheaper.
- RBNZ dated OIS pricing is unchanged across meetings out to November, but 4-9bp softer beyond.
- At the latest auction, whole milk powder prices experienced a decline, slipping by 0.4%. Additionally, butter prices saw a significant drop of 10%, and skim milk powder prices fell by 6%. As a result, the overall index recorded a decrease of 3.3%.
- Today the local calendar sees the release of ANZ Commodity Prices.
- The Asia-Pac calendar is also relatively light with Australia’s Judo Bank Services & Composite PMIs and China’s Caixin’s Services & Composite PMIs as the highlights.
AUSSIE 3-YEAR TECHS: (M3) Bearish Outlook Firms
- RES 3: 97.380 - High Mar 20 and a major resistance (cont)
- RES 2: 97.190 - High May 5 (cont)
- RES 1: 96.730 - High Jun 2
- PRICE: 96.030 @ 15:30 BST Jul 04
- SUP 1: 95.960 Low Jun 17 2022 low (cont)
- SUP 2: 95.451 - 2.618 proj of the Mar 21 - May 2 - May 5 price swing
- SUP 3: 95.161 - 1.0% 10-dma envelope
Aussie 3yr futures have traded to a fresh cycle low of 95.980 last week. Price recently cleared the February lows on the continuation contract, and attention is on a key support at 95.960, the Jun 17 2022 low (cont). Clearance of this level would confirm a key bearish medium-term development and signal scope for an extension towards 95.451, a Fibonacci projection. Initial key resistance is seen at 96.730, the Jun 2 high.
CNH: Gains Extend As Sentiment Improves, Services PMI On Tap
USD/CNH deals a touch under the 7.23 handle. The pair fell ~0.3% yesterday.
- CNH extended post fix gains through yesterday's session after another stronger than expected Yuan fix from the PBOC. Sentiment was boosted as state banks were said to have provided credit support for LGFVs.
- Bulls target the high from 30 Jun (7.2857). Bears focus on the 20-day EMA (7.1967).
- In the equity space the CSI300 rose ~0.2%, the Golden Dragon was closed yesterday due to the US holiday.
- Caixin Services PMI is due to, a downtick to 56.2 from 57.1 is expected. The June Composite print will also cross.
