MNI EUROPEAN MARKETS ANALYSIS: RBA Cut Still Priced For May

• There has been little shift in US equity futures or US yields in the first part of Wednesday trade. The USD is down modestly further, albeit mainly against the yen. USD/JPY is back sub 147.00 but still above key support.
• The Japan PPI was close to expectations, while Australian wages rose more than forecast. RBA-dated OIS pricing is mostly firmer across meetings today, with early 2026 leading. A 25bp rate cut in May is given a 96% probability.
• Regional equities were mostly higher, except for Japan. Other tech sensitive plays saw outperformance psot Tuesday's US lead.
• Looking ahead, on the data front we have final German inflation for April. In the US, mortgage applications are due. We have some central bank speak as well. 

MARKETS

US TSYS: Cash Bonds Little Changed After Yesterday's Tame CPI

TYM5 is dealing at 110-04, +0-05 from closing levels in today's Asia-Pac session. 

• According to MNI’s technicals team, Treasury futures maintain a softer tone following recent weakness. Support at 110-01+, a Fibonacci retracement point, has been broken. Clearance here strengthens a bearish theme and exposes a key support at 109-08, the Apr 24 low. Key near-term resistance has been defined at 111-22, the May 7 high. A break of this level is required to signal a potential reversal.
• There has been no net movement in cash US tsys in today's Asia-Pac session after being little changed yesterday following the tame April CPI report.
• The 10-year yield range seems to be 4.10% - 4.50%, with the yield currently testing the upper bound of this range. A sustained break above this level would see another round of selling targeting the 4.75% area.
• Data: US MBA Mortgage Applications

JGBS: Cash Bonds Little Changed, 5Y Supply Tomorrow, Q1 GDP On Friday

JGB futures are stronger, +7 compared to the settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.

• There has been no net movement in cash US tsys in today's Asia-Pac session after being little changed yesterday following the release of April CPI data.
• Cash JGB movements are bounded by +/- 1bp out to the 30-year and 3bps richer beyond.
• “Japanese 30-year yields avoided climbing above 3% this week after a solid auction, but that looks like a temporary reprieve as rising German yields are likely to drag JGBs in the same direction. Indeed, bunds appear to be heading back toward the levels seen in March, even though the European Central Bank is forecast to lower interest rates again this year. Similar to Japan, the background is increased spending, especially on defence which will add to upward pressure on long-term rates.” (per BBG)
• The benchmark 10-year yield is 0.7bps higher at 1.451% versus the cycle high of 1.596%.
• Swap rates are 1bp lower to 2bp higher, with a steepening bias. Swap spreads are mixed.
• Tomorrow, the local calendar will see International Investment Flow and Machine Tool Orders data alongside 5-year supply. Q1 GDP (P) is due on Friday.

JAPAN DATA: PPI Close To Expectations, Imports Prices Fall

Japan's April PPI was close to market expectations. The print was 0.2%m/m (forecasts were 0.2%, while prior was 0.4%). In y/y terms we rose 4.0%, in line with market forecasts but down from a revised 4.3% gain in March. 

• At face value, this doesn't change the broader headline CPI backdrop. The chart below plots the headline PPI measure against headline CPI, both in y/y terms. Still elevated, but slightly off recent highs.
• In terms of the detail, the manufacturing PPI was down -0.2%m/m, while some commodity related m/m down, particularly for metals. Some offset came from agriculture, up 3.4%, while utilities were also higher.
• Import prices were down 2.9%ym/m in JPY terms for all commodities. In y/y terms this is -7.2%.

Fig 1: Japan PPI Versus CPI - Y/Y

Source: MNI - Market News/Bloomberg 

AUSSIE BONDS: Cheaper But Better Than Worst Levels, Jobs Report Tomorrow

ACGBs (YM -3.0- & XM -4.5) are weaker but stronger than levels seen shortly after the Q1 Wage Price Index (WPI) surprised on the upside.

• "Seasonally adjusted private sector annual wage growth was unchanged from the December quarter at 3.3 per cent. Annual public sector wage growth was higher than the private sector at 3.6 per cent in the March quarter 2025, up from 2.9 per cent in the December quarter 2024." (per ABS)
• There has been no net movement in cash US tsys in today's Asia-Pac session.
• Cash ACGBs are 3-5bps cheaper with the AU-US 10-year yield differential at +1bp.
• The latest ACGB Dec-34 supply achieved a weighted average yield 0.46bp through prevailing mids. However, the cover ratio declined to 3.1708x from 3.9900x.
• The bills strip has bear-steepened, with pricing flat to -5.
• RBA-dated OIS pricing is mostly firmer across meetings today, with early 2026 leading. A 25bp rate cut in May is given a 96% probability, with a cumulative 78bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar will see the April Employment Report.
• AOFM plans to sell A$800mn of the 2.50% 21 May 2030 bond on Friday.

AUSTRALIA DATA: Wage Gains Pick Up, Led By Public Sector

The Q1 wages print was slightly above market expectations, printing at 0.9%q/q (0.8% was forecast and the prior was 0.7%). In y/y terms we rose 3.4%, also above forecasts (3.2%, which was also the prior outcome). 

• This is the first y/y momentum gain since Q2 last year. We are below recent highs for the metric (4.3%y/y, recorded in Q4 2023), but still comfortably above long averages (the 3yr moving average for y/y wages growth is back at 2.5%), see the chart below.
• At face value this suggests little need for aggressive RBA easing action and still suggests tightness in the labor market.
• The detail was a touch on the dovish side, in the sense that stronger wage gains were more focused in traditional public service areas. The ABS noted: "Seasonally adjusted private sector annual wage growth was unchanged from the December quarter at 3.3 per cent. Annual public sector wage growth was higher than the private sector at 3.6 per cent in the March quarter 2025, up from 2.9 per cent in the December quarter 2024."
• The strongest q/q gains were for health care, +1.4%, education +1.3% and public administration, +1.0%. Utilities, along with wholesale trade, at 0.9%, were the next strongest. Weakness was evident in retail trade, accommodation (+0.1%) and manufacturing (+0.3%), although these figures are not seasonally adjusted.

  Fig 1: Australian Wages Growth Ticks Up In Q1, Led By Public Sector Gains

Source: MNI - Market News/Bloomberg  

BONDS: Heavy Session, Underperformed $-Bloc, Food Prices Tomorrow

NZGBs closed 7-10bps cheaper, underperforming its $-bloc counterparts. The NZ-US and NZ-AU 10-year yield differentials closed respectively wider by 3bps and 5bps. 

• There has been no net movement in cash US tsys in today's Asia-Pac session.
• “A record number of people left New Zealand in the year through March, reducing the net gain through immigration to the lowest in more than two years. Some 123,256 people departed the country in the period, including 70,000 New Zealand citizens.” (per BBG)
• Total card spending fell 0.2% m/m versus a revised -1.6% in March.
• The RBNZ balance sheet shrunk further in April to its smallest since 2021.
• Swap rates closed 9-15bps higher, with the 2s10s curve steeper.
• RBNZ-dated OIS pricing is flat to 3bps firmer across meetings today, leaving rates 2–14bps above levels seen prior to the Q1 CPI release on April 17. 25bps of easing is priced for May, with a cumulative 69bps by November 2025.
• Tomorrow, the local calendar will see Food Prices and a speech by Finance Minister Willis on Social Investment.
• 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.

STIR: RBNZ Dated OIS Pricing Firms Since CPI But Much Less Than AUS

RBNZ-dated OIS pricing is flat to 3bps firmer across meetings today, leaving rates 2–14bps above levels seen prior to the Q1 CPI release on April 17.

• Q1 New Zealand CPI came in hotter than expected at 0.9% q/q, lifting the annual rate to 2.5% from 2.2% in Q4. Both tradeables and non-tradeables components contributed to the upside surprise.
• However, the RBNZ’s preferred measure of underlying inflation—the sectoral factor model—edged lower to 2.9% in Q1, down from a downwardly revised 3.0% in Q4. This marks the lowest print since Q2 2021 and places core inflation just under the top of the RBNZ’s 1–3% target band.
• In Australia, Q1 headline and underlying CPI exceeded expectations by 0.1pp, although the trimmed mean slowed to 2.9% y/y, falling within the RBA’s target band for the first time since Q4 2021.
• For comparison, RBA-dated OIS pricing is now 4–40bps firmer than pre-Q1 CPI levels recorded on April 30.

Figure 1: RBNZ Dated OIS Current vs. Pre-CPI Levels (%)

Source: MNI - Market News / Bloomberg

FOREX: USD/JPY Drifts Lower, Steady G10 Trends Elsewhere

G10 forex moves have been fairly modest in Wednesday trade to date. The USD BBDXY index sits little changed, while the DXY index is down a touch, largely due to modest yen gains. This follows Tuesday's USD pullback, which was helped by the downside miss from the US CPI print. 

• Cross asset trends have been fairly muted, with US equity futures little changed, while US Tsy yields have also been very steady. Gold and oil are slightly weaker. Regional equity sentiment is mixed. Tech plays are outperforming, except for Japan markets.
• We had Japan PPI print earlier, which was close to expectations at 4.0% y/y. It doesn't imply a shift in the CPI outlook and is just off recent highs. Import prices were down over 7% y/y.
• USD/JPY has mostly drifted lower, down around 0.35%, last under 147.00. Note the 50-day EMA is at 146.28, in terms of potential downside support.
• Australian Q1 wages data was stronger than expected, but the A$ couldn't regain the 0.6500 handle (highs of 0.64870 and we last tracked near 0.6475.
• In NZ, card spending figures suggested a still fairly sluggish consumer spending backdrop, but NZD was unmoved. We track near 0.5945 in latest dealings, a touch up from end NY levels on Tuesday.
• Looking ahead, on the data front we have final German inflation for April. In the US, mortgage applications are due. We have some central bank speak as well. 

ASIA STOCKS: Good Day for Stocks with Taiwan Leading 

Asia’s major bourses were mostly better today with Taiwan’s TAIEX continuing its good run on the back of strong external inflows.  Expected earnings release from Tencent and Alibaba will give insight into the next leg for the tech rally with expectations remaining high. 

• China’s Hang Seng was strong today rising +1.4% erasing most of yesterday’s losses.  The CSI 300 was up also but by just +0.27%, Shanghai +0.20% with Shenzhen the outlier falling -0.30%
• Taiwan's TAIEX is up for a fourth straight day, up +1.76%
• The KOSPI was up +1.23% and on track to deliver three successive days of gains and is up over 10% year to date.
• In Malaysia, the FTSE Bursa Malaysia KLCI is marginally lower today by -0.22%, following yesterday's rise of over 2%.
• In its first day of trading this week, the Jakarta Composite is up +1.6% to continue its strong period of performance.
• The FTSE Straits Times in Singapore and the PSEi in the Philippines were both modestly down
• Following yesterday's fall of -1.6% the NIFTY 50 has opened strongly today and is up +0.63%

ASIA STOCKS:  Flows into Taiwan Remain Strong 

 Taiwan has now enjoyed US$5.1bn of inflows in the last eight trading days as the TWD rallies over 5% and the TAIEX up almost 5%. 

• South Korea: Recorded inflows of +$151m as of yesterday, bringing the 5-day total to +$497m. 2025 to date flows are -$11,832m. The 5-day average is +$99m, the 20-day average is -$41m and the 100-day average of -$136m.
• Taiwan: Had inflows of +$572m as of yesterday, with total inflows of +$2,546m over the past 5 days. YTD flows are negative at -$13,294. The 5-day average is +$509m, the 20-day average of +$253m and the 100-day average of -$152m.
• India: Had outflows of -$279m as of the 9th, with total inflows of +$1,044m over the past 5 days.  YTD flows are negative -$10,887m.  The 5-day average is +$209m, the 20-day average of +$226m and the 100-day average of -$125m.
• Indonesia: Had outflows of -$34m as of the 9th, with total outflows of -$198m over the prior five days.  YTD flows are negative -$3,252m.  The 5-day average is -$40m, the 20-day average -$57m and the 100-day average -$37m
• Thailand: Recorded outflows of -$74m as of yesterday, outflows totaling -$45m over the past 5 days. YTD flows are negative at -$1,690m. The 5-day average is -$9m, the 20-day average of -$14m the 100-day average of -$18m.
• Malaysia: Recorded inflows of +$185m as of yesterday, totaling +$305m over the past 5 days. YTD flows are negative at -$2,295m. The 5-day average is +$61m, the 20-day average of +$24m and the 100-day average of -$27m.
• Philippines: Saw inflows of $1m as of yesterday, with net inflows of +$34m over the past 5 days. YTD flows are negative at -$219m. The 5-day average is +$7m, the 20-day average of +$4m the 100-day average of -$3m.

Oil Drops After Four Days of Gains

• Following four days of very strong gains, oil fell today in Asia.
• Oil had reacted positively to the news of an evolving trade deal between US and China and got a further bump when President Trump threatened to intensify sanctions on Iran should a nuclear deal not be reached.
• As President Trump tours the middle east, OPEC+ is preparing for their June 1 meeting with expectations growing that a further increase in supply is to be announced.  
• WTI had opened at US$63.62 bbl and declined by -0.40% to $63.39
• Brent had opened at $66.56 and declined -0.41 to $66.30
• As President Trump arrives in Saudi Arabia,  Saudi Aramco announced plans to spend $3.4 billion on its Motiva refinery in Texas, the largest fuel making plant in the US.
• Data on US call options show bullish bets on Brent have increased since the US China news.
• US President Donald Trump appears to prefer oil prices between $40 and $50 a barrel, according to Goldman Sachs Group Inc., citing an in-house analysis of his social-media posts on the topic. (source BBG)

Gold Falls as Chinese Equities Rally 

• Gold slowly lost ground throughout the trading day as momentum in equities saw key indexes higher.
• Overnight the latest CPI print in the US was softer, giving hope for rate cuts and pushing the USD dollar lower.  It is likely that the impact of tariffs is yet to be felt in CPI prints and forecasters remain cautious on the data.
• With limited key data in Asia today, gold took its lead from the equity move and is down -0.77% at US$3,226.46.
• Gold remains at the mid-point between the 20-day EMA of $3,272.69 and the 50-day EMA of $3,166.88
• UBS Group AG’s rich clients are increasingly shifting away from US-dollar assets, turning instead to gold, crypto and investments in China, according to the Swiss bank’s co-head of wealth management for Asia.

CHINA: Country Wrap:  Yuan Could Strengthen Further

• There is still space for yuan to rise further against the dollar in the short term after China and the US reached a temporary truce on tariffs in Geneva, the Securities Times reports, citing analysts.  The yuan is expected to remain volatile and rise in May, fluctuating between 7.0 and 7.3 against the greenback, mostly driven by continuous economic recovery in China and uncertainties of US policies, the report says, citing China Center for Economic Research at Peking University (source Securities Times)
• Goldman Sachs Group Inc. and other major banks boosted their forecasts for China’s 2025 economic growth, citing a better outlook for exports following the tariff truce with the US.  Economists at Goldman Sachs, JPMorgan Chase & Co., ING Groep NV and Bloomberg Economics this week lifted their projections to 4.6% or above from as low as 4% previously. China could avoid a contraction in exports this year after striking a temporary deal with the US to de-escalate their trade conflict, Goldman said in a note Tuesday.  (source BBG)
• China's Hang Seng was strong today rising +1.4% erasing most of yesterday's losses. The CSI 300 was up also but by just +0.27%, Shanghai +0.20% with Shenzhen the outlier falling -0.30%. Taiwan's TAIEX is up for a fourth straight day, up +1.76%
• Yuan Reference Rate at 7.1956 Per USD; Estimate 7.1842
• A touch weaker today with the CGB 10YR 1.67% (+1bp)

SOUTH KOREA: Country Wrap: Mortgage Demand Up in April

• Household loans from banks increased sharply last month due to the recent increase in housing transactions. The increase in mortgage loans also rose significantly from the previous month.  According to the "April Financial Market Trends" released by the Bank of Korea on the 14th, household loans in the banking sector amounted to 1,150.1 trillion won last month, up 4.8 trillion won from the previous month. It increased by 5 trillion won from a year ago. Bank loans and household loans rose sharply from February (3.2 trillion won) and March (1.6 trillion won).  (source MAEIL)
• Asia’s trans-Pacific shipping corridor—a critical artery linking China and North America—has once again been thrown into uncertainty. The protracted tariff war between the United States and China has already cut shipping volumes nearly in half and sent freight rates plummeting. But following the May. 12 decision by Washington and Beijing to enact a 90-day tariff truce, a surge in exports is expected to strain already limited vessel capacity.  (source CHOSUN)
• The KOSPI was up +1.23% and on track to deliver three successive days of gains and is up over 10% year to date.
• The Won has had a quiet day hovering around 1,417.20 for most of the day.
• Bonds had a decent rally with the front end better bid.  KTB 10YR 2.72%

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
14/05/2025	0600/0800	***	SE	Final Inflation Report
14/05/2025	0600/0800	***	DE	HICP (f)
14/05/2025	0700/0900	***	ES	HICP (f)
14/05/2025	0715/0815		GB	BOE Breeden At ISDA Conference
14/05/2025	0900/1000	**	GB	Gilt Outright Auction Result
14/05/2025	0915/0515		US	Fed Governor Christopher Waller
14/05/2025	1100/0700	**	US	MBA Weekly Applications Index
14/05/2025	-	***	CN	Money Supply
14/05/2025	-	***	CN	New Loans
14/05/2025	-	***	CN	Social Financing
14/05/2025	1230/0830	*	CA	Building Permits
14/05/2025	1240/1440		EU	ECB's Cipollone On Liquidity Issues Panel
14/05/2025	1310/0910		US	Fed Vice Chair Philip Jefferson
14/05/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
14/05/2025	2140/1740		US	San Francisco Fed's Mary Daly
15/05/2025	0130/1130	***	AU	Labor Force Survey
15/05/2025	0600/0700	**	GB	UK Monthly GDP
15/05/2025	0600/0700	**	GB	Index of Services
15/05/2025	0600/0700	***	GB	Index of Production
15/05/2025	0600/0700	**	GB	Output in the Construction Industry
15/05/2025	0600/0700	***	GB	GDP First Estimate
15/05/2025	0600/0800	**	NO	Norway GDP
15/05/2025	0600/0700	**	GB	Trade Balance
15/05/2025	0645/0845	***	FR	HICP (f)
15/05/2025	0700/0900		CH	Flash GDP
15/05/2025	0700/0900		EU	ECB's Cipollone at Payments Forum
15/05/2025	0750/0950		EU	ECB's Elderson At Green Finance Conference
15/05/2025	0900/1100	**	EU	Industrial Production
15/05/2025	0900/1100	***	EU	GDP (p)
15/05/2025	1015/1215		EU	ECB's De Guindos At ISDA Meeting
15/05/2025	1130/1330		EU	ECB's Cipollone In Digital Currency Fireside Chat
15/05/2025	1215/0815	**	CA	CMHC Housing Starts
15/05/2025	1230/0830	***	US	Jobless Claims
15/05/2025	1230/0830	**	US	WASDE Weekly Import/Export
15/05/2025	1230/0830	**	CA	Monthly Survey of Manufacturing
15/05/2025	1230/0830	**	CA	Wholesale Trade
15/05/2025	1230/0830	***	US	Retail Sales
15/05/2025	1230/0830	***	US	PPI
15/05/2025	1230/0830	**	US	Empire State Manufacturing Survey
15/05/2025	1230/0830	**	US	Philadelphia Fed Manufacturing Index
15/05/2025	1240/0840		US	Fed Chair Jerome Powell
15/05/2025	1300/0900	*	CA	CREA Existing Home Sales
15/05/2025	1315/0915	***	US	Industrial Production