AUSSIE BONDS: Little Changed, US Tsys Modestly Cheaper With Risk-On
Jun-03 23:13
ACGBs (YM flat & XM -0.5) are little changed after US tsys erased Asian session gains that followed a solid JGB bond auction, closing modestly cheaper amid the upbeat stock market. US yields finished 1-2bps higher.
- Big tech helped the NASDAQ advance 0.81% Tuesday, with the S&P 500 gaining 0.6% while the Dow was up 0.5%. These follow the strength in May with the NASDAQ and S&P 500 now higher on the year.
- Risk appetite was boosted by talk that President Trump could meet with President Xi this week, underpinning hopes for a trade deal.
- S&P Global PMIs for May have printed: Services Index falls to 50.6 from 51 in April; and Composite Index falls to 50.5 from 51 in April.
- Cash ACGBs are little changed with the AU-US 10-year yield differential at -19bps.
- The bills strip is unchanged.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given a 79% probability, with a cumulative 81bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- Today, the local calendar will see Q1 GDP, with the market expecting +0.4% q/q and +1.5% y/y.
- The AOFM plans to sell A$800mn of the 1.50% 21 June 2031 bond on Friday.
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GOLD: Safe Haven Bid Diminishing from Gold for Now
May-04 23:04
- Gold had its worst week since late February as news of potential trade agreements gave markets a boost and pushed some equity bourses back above pre tariff announcement levels.
- Gold was down -2.39% for the week, and opens today in Asia at US$3,239.76.
- From the late April high of $3,423.98, gold is now down over 5% as a combination of profit taking and a redistribution back into equities dictates its fortunes.
- For the first time since early April, gold now sits on the 20-day EMA of $3,243.05. Any break below could see a move lower to the 50-day EMA of $3,119.98
BONDS: NZGBS: Cheaper With US Tsys After Stronger Than Expected US NFP
May-04 23:04
In local morning trade, NZGBs are 4bps cheaper after US tsys sold off on Friday following stronger-than-expected non-farm payrolls data.
- US tsys finished near session lows on Friday after trading richer at the open. Higher-than-expected nonfarm payrolls at 177k (sa, cons 138k), of which private contributed 167k (sa, cons 125k), triggered the early reversal. However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs. -48k two-month revision).
- US stocks are back near four-week highs—pre-"Liberation Day" levels—as optimism about a trade deal improved.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Swap rates are 4-6bps higher with the 2s10s curve steeper.
- RBNZ dated OIS pricing is little changed across meetings. 26bps of easing is priced for May, with a cumulative 77bps by November 2025.
- Today, the local calendar will be empty.
AUSTRALIA: Little To Stand Out This Week, Household Spending Tuesday
May-04 22:53
There are number of monthly data releases this week but nothing in particular that stands out. The closest to a highlight will be Tuesday’s March household spending data, which is set to replace retail sales in the middle of the year.
- Bloomberg consensus expects that household spending will rise 0.2% m/m & 3.9% y/y in March after rising 0.2% m/m & 3.3% y/y. March retail sales rose 0.3% m/m but flat Q1 volumes disappointed.
- The Melbourne Institute’s April inflation gauge prints on Monday and it has been running close to the trimmed CPI in recent months. It was 2.8% in March.
- ANZ job ads for April are also on Monday. Q1 saw vacancies continuing to moderate but the ratio with unemployment remains above average.
- The final April S&P Global composite and services PMIs print on Monday. The preliminary reading is consistent with positive but moderate growth.
- March building approvals are released on Tuesday and forecast to fall 1.8% m/m after a 0.3% drop the previous month.
- There are no RBA events scheduled for the week. The next meeting is May 20.
