NZD: Marginally Pressured, Thursday's Lows Intact
NZD/USD prints at $0.6220/25, the pair is ~0.2% lower today.
- Weaker regional equities in the early part of the Asian session weighed on risk sentiment, NZD/USD was supported below $0.6220 and losses were marginally pared.
- NZD is holding softer despite a recovery off session lows in regional equities and US equity futures.
- AUD/NZD is a touch firmer but the cross is holding below $1.09 for now.
- Cross asset wise; e-minis have pared an early ~0.2% loss to sit ~0.1% firmer. The Hang Seng is ~0.2% firmer. US Tsy Yields are a touch lower across the curve.
- Looking ahead, the next data of note is Mondays June Trade Balance, there is no estimate for the print and the prior read was a small surplus of $46mn.
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AUSSIE BONDS: Richer, Off Bests, Dec-34 Supply Goes Well
ACGBs are richer (YM +5.0 & XM +6.0) but off session highs, after ACGB Dec-34 supply sees the recent run of strong pricing at ACGB auctions continue. The latest round of supply sees solid demand with the weighted average yield printing 1.03bp through prevailing mids and the cover ratio moving higher to 3.8186x from 3.6250x at the May auction.
- With the local calendar light, local participants have likely been on headlines and US tsys watch. So far in Asia-Pac trade, yesterday’s US tsy strength has faded with yields 1-2bp higher across major benchmarks.
- The Australian economy will expand by 1.5% in 2023, 1.5% in 2024 and 2.4% in 2025, according to a survey conducted by Bloomberg News. A survey of 44 economists was conducted from June 15-20. The chance of a recession happening over the next 12 months is 50%, according to 18 respondents. (See link)
- Economists expect the 10-year bond yield to increase to 3.98% by end-Q3. The RBA cash rate is expected to reach 4.60% by end-Q3.
- Cash ACGBs are 5-6bp richer with the AU-US 10-year yield differential +1bp at +23bp.
- Swap rates are 5bp lower with EFPs slightly wider.
- Bills are 2-4 richer across the strip.
- RBA-dated OIS pricing is 1-6bp softer across meetings with Feb’24 leading.
US TSYS: Pressure Marginally Extends
Tsys have marginally extended losses in recent dealing, this comes alongside the greenback ticking marginally higher. This leaves cash tsys 1-2bps cheaper across the major benchmarks. TYU3 deals at 113-07+, -0-02+, at the base of the 0-04+ range.
AUSSIE BONDS: ACGB Dec-34 Supply Goes Well
Expectations of sustained strong pricing at auctions proved accurate, as the possible negative factors mentioned in our auction preview did not significantly hamper the overall strength of bidding.
- The latest round of ACGB Dec-34 supply sees the recent run of strong pricing at ACGB auctions continue with the weighted average yield printing 1.03bp through prevailing mids (per Yieldbroker). The cover ratio moved higher to 3.8186x from 3.6250x at the May auction.
- Today's bidding was likely influenced by several factors, including a substantially higher outright yield compared to the previous offering, a low level of issuance, and the line's hedgability as it is included in the XMM3 basket. These factors collectively contributed to the strong bidding seen today.
- The small number of successful bidders also showed some investors were willing to pay up to access the line.
- There has been no significant movement observed in the ACGB-34 cash trade and XM futures following the auction.
