STIR: $-Bloc Markets Firm Over Past Week, Except For NZ
May-09 03:58
Interest rate expectations across dollar-bloc economies have generally firmed through December 2025 over the past week. The US saw the most significant shift with a 20bps increase in expected year-end rates, while Canada and Australia both firmed by approximately 12bps. New Zealand remained broadly unchanged.
- On Wednesday, the Federal Reserve held its policy rate steady at 4.25–4.50%, as widely expected, emphasising a patient approach amid continued economic strength. While the statement noted "stagflation risks," Chair Powell struck a more balanced tone, supporting market sentiment. "The labour market is solid. Inflation is low. We can afford to be patient as things unfold. There's no real cost to our waiting at this point," he said. Fed officials will emerge from the pre-meeting blackout on Friday, with Barr, Kugler, Williams, Barkin, Waller, Hammack, and Cook all scheduled to speak.
- In New Zealand, Q1 labour market data showed tentative signs of stabilisation at weak levels. Although the unemployment rate held steady at 5.1%, beating expectations, the anticipated increase in labour supply failed to materialise. The data largely aligns with the RBNZ’s February projections, keeping a 25bp rate cut at the May 28 meeting firmly on the table.
- In Canada and Australia, newsflow was limited over the past week.
- The next major event in the $-bloc is the RBA's policy meeting on May 20, where markets are currently fully pricing in a 25bp rate cut.
- Looking ahead to December 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 3.66%, -67bps; Canada (BOC): 2.33%, -42bps; Australia (RBA): 3.10%, -100bps; and New Zealand (RBNZ): 2.73%, -78bps.
Figure 1: $-Bloc STIR (%)
Source: MNI – Market News / Bloomberg
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US TSYS: Savage Bear-Steepener As China Retaliation In Focus
Apr-09 03:56
TYM5 is 110-12+, +1-02+ from closing levels in today's Asia-Pac session.
- Cash US tsys have extended yesterday’s decline during the Asia-Pac session. The sell-off reflects growing concerns that China may retaliate against tariffs by offloading US assets, including US tsys.
- At present, cash US tsys are trading 3-16bps cheaper across benchmarks, with the curve steeper.
- Yesterday, Trump officials confirmed 104% added tariff on China went into effect at noon.
- Concurrently, China vowed to "fight to the end".
- On the local front, the focus turns to the March FOMC minute release at 1400ET today, CPI on Thursday and PPI on Friday morning.
- Reminder, banks kick off the latest earnings cycle this Friday with Bank of New York Mellon, Wells Fargo & Co, JPMorgan Chase and Morgan Stanley reporting.
JGBS: Savage Bear-Steepener As US Long-End Sell-Off On China Fears
Apr-09 03:51
In Afternoon dealings, JGB futures have gapped lower, -34 compared to the settlement levels.
- (MNI The BoJ is closely analysing how US tariffs will affect Japan’s economy and prices, amid growing uncertainty, Governor Kazuo Ueda told lawmakers on Wednesday.
- The BoJ will manage monetary policy in an appropriate manner, while carefully monitoring the economy, prices and financial markets, he added, without elaborating on how and when the bank might act.
- The bank is also examining how the tariffs evolve and impact the BoJ's economic and price views, he continued.
- Today’s weakness in JGBs appears to be driven by moves in cash US tsys, which have extended their decline during the Asia-Pac session. The sell-off reflects growing concerns that China may retaliate against tariffs by offloading US assets, including tsys. At present, cash US tsys are trading 3–16 basis points cheaper across the curve.
- Cash JGBs have also bear-steepened, with yields 1-30bps higher. The benchmark 30-year yield is 28.3bps higher at 2.812%, a new cycle high and the highest since 2004.
- The swaps curve has twist-steepened, with rates 3bps lower to 20bps higher, pivoting at the 10-year. Swap spreads are tighter.
AUD: AUD/USD - Struggles To Stay Below 0.6000
Apr-09 03:33
After opening very heavy and making new lows to 0.5915 the AUD has bounced back to 0.6000 as the USD gives back some of its overnight gains. This is striking as US treasuries yields continue to tear higher touching 4.37% in Asia.
- The Asian range has been 0.5915 - 0.6002.
- Very interesting price action today with risk under pressure and US yields higher. Amazingly the AUD has had a decent bounce and is struggling to maintain a foothold sub 0.6000.
- 650m 0.5975 expiring today
- The AUD has been trading poorly across the board in recent days reflecting the markets negative sentiment, the price action today though seems to imply someone is taking advantage of cheap levels and taking some off the table.
- While global markets remain under pressure the AUD will find supply on bounces, expect levels around 0.6100/0.6200 to find resistance.
- Data : FOMC minutes
AUDUSD
Source: MNI - Market News/Bloomberg
