AUSSIE BONDS: Modestly Cheaper With A Slightly Steeper Curve

NZGBs closed showing a twist-steepener, with benchmark yields 2bps lower to 2bps higher. 

• Cash US tsys are slightly cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off. Fed Vice Chair Philip Jefferson as well as regional Fed chiefs Tom Barkin (Richmond), Neel Kashkari (Minneapolis) and Patrick Harker (Philadelphia) are scheduled to speak later Tuesday.
• NZ recorded its third merchandise trade surplus in four months in March at $970mn up from $392mn. The YTD deficit narrowed to $6.13bn from $6.63bn. It has now declined around $11bn since the May 2023 peak. Both export and import growth were robust last month. Trade is a bright spot in NZ’s struggling economy but with a 10% tariff on goods to the US and an escalating US-China trade war the outlook is highly uncertain and likely to be negative.
• Swaps closed showing a bull-steepener, with rates 1-5bps lower.
• RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with late  2025 / early 2026 leading. 27bps of easing is priced for May, with a cumulative 83bps by November 2025.
• Tomorrow, the local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$250mn of the 4.25% May-36 bond.

The BBDXY had an Asian range of 1218.32 - 1213.72. With hopes of any early trade deal fading and Trumps Powell comments adding further uncertainty, the market has very quickly returned to what is now becoming a consensus trade, sell the USD. An FT article quoted the Centre for European Reform - “ German support for its industry will create downstream demand for suppliers in other European countries that are reeling from Chinese competition and the threat of US tariffs. Adding that smaller countries could demand that Germany nudge its industry to build factories in other parts of Europe.”

• EUR/USD -  Asian range 1.1482 - 1.1540, has traded better bid most of our session. Traders are targeting a move back to 1.2000 in the Euro as the USD’s safe haven role is reassessed. Dips back to 1.1450 should once again find demand.
• GBP/USD - Asian range 1.3362 - 1.3410, dealing near the session highs. GBP yesterday exploded higher through the previous week's highs around 1.3300. Expect buyers on dips to reemerge back towards 1.3250/1.3300.
• USD/JPY -  Asian range 140.10 - 141.17,going into the London open dealing near the lows. A big break below 141.50/142.00 yesterday in low liquidity, currently testing the pivotal support  around 140, a break here could see the move really accelerate, targeting 125/130.
• USD/CNH - Asian range 7.2923 - 7.3158, the USD/CNY fix printed at 7.2074. China has warned countries against striking deals with the US that could hurt Beijing’s interests, putting countries in a position where they will eventually have to pick a side. Watch EUR/CNH and CNH/JPY to really see the recent yuan underperformance.
• Cross asset : SPX +0.37%, Gold 3481, US 10yr 4.41%, BBDXY 1214, Crude oil 63.73.
• Data/Events : Spain Trade Balance, EC Govt Debt/GDP ratio, IMF releases its World Economic Outlook

Fig 1: EUR/CNH Spot Weekly Chart

Source: MNI - Market News/Bloomberg

Asian equity markets have been mixed in the first part of Tuesday trade, although the major indices are outperforming the sharp cash losses US markets saw in Monday trade. US equity futures re-opened higher this morning in Asia Pac trade, but have only recaptured a fraction of the losses seen on Monday. Eminis were last around +0.35% higher. 

• Japan markets are little changed, with a modest downside bias at this stage. The NKY 225 was off around 0.30%, but still holding above the 34000 level. Yen has continued to rally and is threatening to break through 140.00 against the USD. The Topix is little changed.
• Hong Kong markets have seen volatility, but the benchmark HSI is little changed, last just under 21400. This is within striking distance of recent April highs. The tech sub index is underperforming, down 0.50%. Bellwether China names like Meituan and JD.com have fallen amid reports of greater competition in the food delivery business (per BBG).
• Onshore China bourses are little changed, the CSI 300 holding under 3800.
• The Kospi is up modestly, but the Taiex is down 1.30%, underperforming broader region trends. Trade tensions were a factor weighing on TSMC, amid chip export control concerns
• In South East Asia, Singapore's benchmark index is up around 1.2%. Indonesian stocks are also outperforming, up close to 0.90% for the JCI.