AUSSIE BONDS: Little Changed, Subdued Session To End Week

The broader sentiment for Asia's major bourses today was positive with the best performers the KOSPI and the TAIEX.  Both market have enjoyed a turnaround in fortune in recent weeks as strong inflows have been enjoyed.  Taiwan for example as experienced over $7bn of inflows in May alone and the Korea $750m.  

• China's major bourses were all positive today with the CSI 300 leading the way, up +0.68%, the Hang Seng up +0.53%, Shanghai up +0.38% and Shenzhen up a mere +0.09%.
• The KOSPI had a very strong day rising +1.06% to take returns into positive for the week.  
• The TAIEX is up +1.03% today yet after strong falls on Monday remains behind for the week.  
• The FTSE Bursa Malaysia KLCI is having a weak period at present and is down for a fifth day in a row, by -0.28%.
• The Jakarta Composite's strong period continues up +0.67%, ahead of the Central Bank decision today.  
• In Singapore, the FTSE Straits Times fell -0.35% and the PSEi in the Philippines was flat.
• India's NIFTY 50 has had a strong start to the trading day rising +0.53% after three days of losses.  

NZGBs closed near cheaps, showing a modest bear-steepener, with benchmark yields 1-3bps higher. 

• Swap rates closed 2-3bps lower, with implied swap spreads tighter.
• The RBNZ has released its first official business expectations survey for Q2 2025 after trialling it over H2 2024. It found that inflation expectations rose across time horizons from 1-year to 10-years. Data released last week also showed an increase for Q2.
• The RBNZ decision is to be announced on May 28 and it is likely to cut rates 25bp but rising inflation expectations may make its tone more cautious.
• RBNZ dated OIS pricing closed little changed across meetings. 25bps of easing is priced for May, with a cumulative 64bps by November 2025.
• Tomorrow, the local calendar will see the Budget.
• “New Zealan’d budget update is likely to project a slower near-term fiscal consolidation path as a weaker economy weighs on revenues. The half-year economic and fiscal update projected GDP growth of 0.5% in fiscal 2024-25. We forecast the economy is on track to contract 0.8%. The Reserve Bank of New Zealand projects a 0.9% contraction.” (per BBG)
• On Friday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$150mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.

After falling almost 2% on Tuesday, gold prices are moderately higher during today’s APAC session on concerns over a deterioration in the situation in the Middle East following CNN reports that Israel is considering a strike on Iran’s nuclear infrastructure. Bullion has range traded though reaching a high of $3314.69 followed by a low of $3285.50 and is now 0.4% higher at $3304.50/oz to be little changed in May. 

• Technicals continue to be consistent with a corrective bear cycle, but today gold held above initial resistance at $3256.6, 20-day EMA, opening up $3347.5, 9 May high. Moody’s downgrade of US sovereign debt has encouraged flight-to-quality buying this week. Initial support is at $3121.0, 15 May low.
• Apparently Israel is yet to decide on whether to attack Iran and the likelihood looks to depend on what it thinks of US-Iran nuclear talks, as it won’t be happy if Iran retains any ability to refine uranium, according to CNN.
• Equities are generally stronger with the Hang Seng up 0.5% and KOSPI +1.0% but S&P e-mini down 0.4%. Silver is off its intraday low of $32.93 but is currently little changed on the day at $33.08. Oil is higher with WTI up 1.9% to $63.21. Copper is +0.7% and iron ore just under $100/t. The USD index is down 0.4%.
• Later the Fed’s Barkin and Bowman and ECB’s Lane appear. The ECB’s May Financial Stability Review is published. UK April CPI is released and likely to show impacts from government policy changes.