STIR: Expected YE AU-NZ Official Rate Diff Narrowed Substantially This Week

TYM5 has traded higher with a range of 110-20 to 111-00+ during the Asia-Pacific session. It last changed hands at Heading 110-29, up 0.04 from the previous close.

• The US 10-year yield is drifting lower, dealing around 4.34%, down from its open around 4.40%
• The US 2-year yield is unchanged, dealing around 3.81%
• Risk has reversed higher as Trump makes a U-turn saying he won’t fire Powell and made comments that seemed to soften his stance towards China.
• Block Curve flattener flows : SELL 8200 of USM5 traded at 108-06, post-time 01:25:20 BST (DV01 $353,017). BUY 2800 of USM5 traded at 114-22, post-time 01:25:20 BST (DV01 $353,492).
• 10-year Yields, having bounced off their support around the 4.25 area, yields are consolidating with the range looking something like 4.25/4.50% for now.

• Data/Events : US S&P Global Services & Manufacturing PMI, New Home sales

   

ACGBs (YM -6.0 & XM +1.5) are dealing mixed on a data light Sydney session, with the short-end under pressure as markets re-assess tariff-tied risks to global trade and the Trump Admin's efforts to meddling with the Federal Reserve's independent policy making.

• Risk-on sentiment extended into today’s Asia-Pacific session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence).
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• Cash US tsys have twist-flattened in today's Asia-Pac session, with yields 2bps higher to 8bps lower.
• Cash ACGBs are 6bps cheaper to 1bps richer with the AU-US 10-year yield differential at -10bps.
• Swap rates are flat to 5bps higher, with the 3s10s curve flatter.
• The bills strip is cheaper with pricing -4 to -9.
• RBA-dated OIS pricing is 2-10bps firmer across meetings today. A 50bp rate cut in May is given a 14% probability, with a cumulative 114bps of easing priced by year-end (based on an effective cash rate of 4.09%).

At the Tokyo lunch break, JGB futures are weaker, -32 compared to the settlement levels, but above session lows.

• Cash US tsys have twist-flattened in today’s Asia-Pac session, with yields 2bps higher to 8bps lower. This comes with risk-on sentiment extending into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears were a further weight on broader US asset related sentiment.
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 4.5bps higher to 5bps lower. The benchmark 10-year yield is 3.6bps higher at 1.351% versus the cycle high of 1.596%.
• The swaps curve has also twist-flattened, with rates 3bps higher to 4bps lower.  
• Today, the local calendar has been light, with Jibun Bank PMIs as the highlight. The Tertiary Industry Index is due later. Tomorrow will see PPI Services.