BONDS: NZGBS: Bear-Flatter After RBNZ Hawkish Cut
May-28 04:49
NZGBs closed 4-9bps cheaper, with a flatter curve.
- The RBNZ cut rates 25bp to 3.25% following a vote that included an option to leave rates unchanged. The vote wasn’t unanimous, with one dissenter. Despite this, the OCR path was revised down to show a trough 25bp below February’s at 2.85%.
- In his first press conference as Governor, Hawkesby noted that this was the first vote on the direction of rates in two years—something that typically occurs at inflection points and highlights the current high level of uncertainty. With policy rates now in the “neutral zone,” he emphasised that the MPC is positioned to “respond to developments as they occur,” indicating that further easing is not guaranteed and future moves will depend on incoming data and the evolving outlook.
- Swap rates closed 7-10bps higher.
- RBNZ-dated OIS pricing closed 6-10bps firmer across meetings versus pre-RBNZ levels. Markets had fully priced in today’s 25bp cut ahead of the decision. A total of 32bps of easing is now expected by November 2025.
- Tomorrow, the local calendar will see the RBNZ Governor in front of the Parliament Select Committee on MPS. ANZ Business Confidence is also scheduled for release.
- The NZ Treasury also plans to sell NZ$225mn of the 4.50% May-30 bond and NZ$225mn of the 4.25% May-36 bond.
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GOLD: Gold Softer Again as Profit Takers Move In.
Apr-28 04:46
- Gold has kicked off the week with a fall in Asian trading, down -0.80% today.
- Up over 25% year to date on trade war concerns, gold is one of the best performing assets in what is proving to be a volatile start to the year.
- Reaching a new all-time high of US$3,423.98 this month, gold has surged through most predictions at the beginning of the year.
- Gold started the trading week this week in Asia at $3,325.21 and fell to $3,292.74
- Key central banks globally have reported increases to their gold reserves, boosting demand for the precious commodity whilst China’s Gold Association reported a 6% decline in gold consumption in Q1.
- Data out from the CFTC last Friday showed that Hedge Funds have reduced the number of their gold longs to the lowest level in one year indicating that the rally for now may be stalled.
- For now, all major moving averages are pointing upwards: a sign that the bullish momentum remains in place but with the CFTC positioning data, it is possible we could see a modest week for gold should trade war headlines not dominate.
OIL: Geopolitical Uncertainty Clouding Oil Outlook
Apr-28 04:44
Oil prices are moderately higher during today’s APAC session as markets watch and wait for progress on US trade negotiations. WTI is up 0.5% to $63.34/bbl off the intraday low of $62.88/bbl and Brent is +0.3% to $67.10/bbl after falling to $66.70 earlier. The USD index is off its high to be little changed on the day.
- The oil markets looked through today’s China economic press conference which included a statement that rates and the RRR would be reduced and that the 5% 2025 growth target is expected to be met.
- Geopolitical uncertainty is at the fore with significant uncertainty around US tariffs, threats to increase sanctions on Russia if it doesn’t reach a deal on Ukraine and ongoing US-Iran talks on Iran’s nuclear programme. In addition, with a meeting on May 5 the outlook for OPEC production is also unclear after the larger-than-expected increase in April.
- Later US April Dallas Fed manufacturing and UK April Nationwide house prices are released. ECB’s de Guindos presents ECB’s 2024 Annual Report. Oil markets will be monitoring Friday’s US payrolls.
FOREX: Antipodean Wrap - AUD & NZD Drift Sideways
Apr-28 04:22
Risk has struggled to hold onto its gains leaking lower in Asia as the market gives back some of its gains made on Friday night. (Bloomberg) -- RBNZ increased its foreign currency intervention capacity to a record NZ$26.7b at the end of March as it sold New Zealand dollars, according to data released by the central bank Monday. (Bloomberg) -- S&P Global Ratings warned Australia’s prized AAA sovereign credit rating may be at risk if election campaign pledges result in larger structural deficits, debt and interest costs, highlighting fiscal pressures facing the next government.
- AUD/USD - Asian range 0.6373 - 0.6407, AUD has traded sideways most of the Asian session. Dips back to the 0.6250/0.6300 area should continue to find demand while the market continues to focus on a lower USD.
- AUD/JPY - Asian range 91.54 - 92.04. Price goes into the London trading around 91.80, testing the highs within the last 10 days range of 0.8950/0.9200. Goldman’s like AUDJPY as the best vehicle to tactically express JPY strength.
- NZDUSD - Asian range 0.5943 - 0.5968, going into London trading around 0.5960. Demand should return first around 0.5900, then around the 0.5850 area.
- AUD/NZD - Asian range 1.0717 - 1.0737, the cross has drifted sideways in the Asian session. Watch for supply to return on any bounce back towards the 1.0800 area.
