NZD: HSBC See Rate Differentials Turning More Supportive for NZD

While the impacts of the Spanish & Portuguese energy blackout continue to be felt across both countries - the ramifications for markets have been pretty limited so far beyond some modest weakness in both the IBEX-35 and the PSI-20.

• We're monitoring headlines that all trains have been stopped with no departures, subways and traffic lights have been impacted and the effects are pretty nationwide. That said, Spain's network operator has activated emergency plans to restore supply - but there's no indication on when the blackout will be fully reversed.
• Spanish bond markets and the EUR are broadly unaffected, but are off the better levels of the European morning - a swift resolution here would have very limited read-through for the economy, however protracted problems here could begin to cause issues for markets should industry and transport suffer prolonged or repeat blackouts.

Option desks report better low delta Jun'25 Treasury puts overnight, extremely light SOFR options at the moment. Underlying futures weaker, near recent lows (TYM5 at 111-13, -3.5). Projected rate cut pricing looks softer vs. late Friday levels (*) as follows: May'25 at -1.9bp (-2.7bp), Jun'25 at -15.4bp (-16.6bp), Jul'25 at -35.6bp (-37.1bp), Sep'25 -54.6bp (-56.1bp).

• Treasury Options:
  • 10,000 TYM5 107 puts, 2 ref 111-13
  • 15,000 TYM5 106/107 put spds
  • over 5,800 TYM5 109 puts 8 last
  • over 5,000 TYM5 109.5/110.5 put spds, 14 ref 111-16
  • 5,900 TYM5 113 calls, 20 ref 111-15.5

• On the commodity front, Gold continues to trade below its recent highs. The trend needle points north and the latest move down appears corrective. The retracement is allowing an overbought condition to unwind. Moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3547.9, the 1.764 projection of the Feb 28 - Apr 3 - Apr 7 price swing. Initial firm support to watch lies at 3219.4, the 20-day EMA.
• In the oil space, a bearish theme in WTI futures remains intact and the recovery that started on Apr 9 appears corrective. The move higher has allowed an oversold trend condition to unwind. Recent weakness resulted in the breach of a number of important support levels, reinforcing a bearish threat. A resumption of the bear cycle would open; $58.29, the Apr 10 low, and $53.72, the 2.236 projection of the Feb 20 - Mar 5 - Apr 2 price swing. Resistance to watch is $65.73, the 50-day EMA.