OIL: Lead Indicator Signals Weaker Oil Prices In Line With Fundamentals

In local morning trade, NZGB yields are 7-8bps higher, after US tsys finished sharply cheaper. US tsys gapped lower in early London trade, and stocks surged to the pre-Liberation Day levels (April 2), after the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.

• After a collective sigh of relief, US tsys traded sideways, near session lows for much of the session.
• The increase in risk appetite and the less dovish Fed outlook saw the 2-year bond cheapen 12bps to 4.01%, with the 10-year yield rising 9bps to 4.48%.
• Projected US rate cut pricing retreated from prior levels (*) as follows: Jun'25 at -2.0bp (-2.8bp), Jul'25 at -10.8bp vs. (-13.1bp), Sep'25 -27.0bp (-29.3bp), Oct'25 -40.3bp (-42.6bp).
• Today’s focus is on April US CPI figures at 0830ET.
• Swap rates are 10-12bps higher, with the 2s10s curve unchanged.
• RBNZ dated OIS pricing is little changed across meetings. 25bps of easing is priced for May, with a cumulative 69bps by November 2025.
• Today, the local calendar will be empty ahead of Card Spending and Net Migration data tomorrow.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.

• MNI: UK BRC APR BY VALUE SHOP SALES LFL +6.8% YY, TOTAL +7% YY

The overnight range was 145.73 - 148.65, Asia is currently trading around 148.40. USD/JPY gapped higher on the news of a US/China agreement to a significant reduction in tariffs for 90 days. 

• “Nomura closed its short dollar-yen position as the currency pair surged on US-China trade talks, but maintained its medium-term outlook for a lower exchange rate. Mizuho recommends unwinding short positions on the view that US real rates will stay relatively higher in the months to come.”(BBG)
• The fact that the early Asian gap higher on Monday morning never looked like getting filled back in should have been the canary in the coal mine, as the trade announcement delivered something concrete. 
• USD/JPY scythed through the 1.4700 area as shorts pared back some of their positioning. 
• With stocks on a tear as momentum type funds are forced back into the market the USD will continue to benefit particularly against safe haven currencies like the JPY.
• This will now test the conviction of the USD bears short-term, but levels back towards 150/151 should offer good levels for those that want to express this view.
• "Nissan will double planned job cuts to about 20,000, NHK reported. The carmaker may close plants in Japan, Kyodo said."(BBG)
• CFTC data shows Asset managers pared back their already extensive JPY longs very slightly, and leveraged funds continue to build on their newly initiated shorts.
• MNI FX OPTIONS: Expiries for May13 NY cut 1000ET (Source DTCC): USD/JPY: Y143.00($1.5bln), Y146.75(E567mln), Y151.00($1.2bln)
• Data/Event : Apr Money Stock

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg