ASIA STOCKS: Japan & Aust Firmer, But Taiwan & South Korea Weaker

G20 inflation moderated around 2pp over the 12months to January and it now stands at 4.8%. Concerns are growing over the inflationary impact of US tariffs but that remains highly uncertain as it is not yet clear whether they will be imposed broadly across countries and sectors, size of second round effects and what retaliation there will be. Developments in other global prices so far this year are mixed but are unlikely to cause concern.

• The NY Fed’s global supply chain pressure index has been fairly stable since mid-2024. It rose slightly in February but remained marginally negative signalling that supply chain pressures are close to neutral. However, it is no longer putting downward pressure on global inflation.
• Shipping rates have been mixed in March with the Baltic Freight Index sharply higher, which may reflect contract renewals, but still down 30.5%y/y but the FBX global container index is significantly weaker and down 22.9% y/y with rates from China to both the Mediterranean and North American east coast lower. 

G20 CPI y/y% vs container rate

• After a prolonged period of deflation, the annual rate in FAO food prices turned positive in September and has trended higher since. In February, it rose 1.6% m/m and 8.2% y/y, highest since August 2022. The monthly increase was broad-based but annual strength is concentrated in dairy and oils. Cereals rose 0.7% m/m but were still down 1.1% y/y in February and they could fall in March with rice prices down on the month. They are down around 25% y/y helping to reduce Asian headline inflation.
• Industrial commodities are mixed with metal prices higher rising 3.4% m/m in March to be up 12% y/y but iron ore down 4.2% m/m and 6% y/y. After being weak for some time, wool is recovering up 3.1% m/m, sixth straight rise, to be up 7% y/y, but remains well below pre-Covid levels.

G20 CPI y/y% vs food & oil prices

Source: MNI - Market News/Refinitiv

NZGBs closed on a strong note, reversing the negative spillover from yesterday’s heavy NY session for US tsys. NZ yields finished flat to 1bp richer after being 4bps cheaper across benchmarks early.  NZ-US 10-year yield differential finished 5bps lower at +21bps.

• The local calendar was empty today and will remain so until Friday’s release of ANZ Consumer Confidence and Filled Jobs data.
• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's heavy session. Today’s US calendar will see Philadelphia Fed Non-Manufacturing, Richmond Fed Mfg, House Prices, New Home Sales and Building Permits data, as well as, Fedspeak from Kugler and Williams.
• Swap rates closed 1bp lower.
• RBNZ dated OIS pricing closed flat to 3bps firmer across meetings, with late 2025 / early 2026 leading. 24bps of easing is priced for April, with a cumulative 65bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

• China’s bond futures are ignoring regional trends and are higher in Tuesday's trading.
• Following the injection of liquidity in the open market operations, the China 10YR bond future is up +0.20 to 107.735.
• The move higher sees the 10YR trade through the 200-day EMA of 107.55 and is approaching the 20-day EMA of 107.77.
• It has not traded above the 20-day EMA since early February.
• China’s 2YR bond future is up also by +0.02 to 102.37 yet remains firmly below all major moving averages, the nearest being the 20-day EMA at 102.44.
• The cash market has rallied also with the CGB 10YR down 2bps today to 1.81%, 7bps lower than the near-term peak of 1.89%.
• Last night the Central Bank unveiled new methodology for the pricing of its 1-year Medium Term Loan facility which is seen as further evidence of the downplaying of its importance over time.
• Markets are now tending to focus more on the daily OMO as evidenced by the strong performance from bond markets today, following the liquidity injection.