BONDS: NZGBS: Bull-Flattener Pared By Trade-Deal Induced Risk-On

Oil prices are higher today as risk-sensitive assets rally following sharp falls since the US announced higher-than-expected tariffs. WTI trended up through today’s APAC session and is +1.4% to $61.55/bbl after a high of $61.75. Brent is 1.4% stronger at $65.09, close to the intraday high and off the low of $64.45. The softer USD is also likely providing some support to dollar-denominated oil (USD index -0.4%).

• Today has seen a relief rally but concerns over the impact of a trade war on global oil demand are never far away. Markets appear to have paused due to a mix of selling fatigue and watching & waiting to see the results of imminent negotiations between the US and numerous regions, including EU, ASEAN and Japan. A lack of compromise though would likely send oil prices lower again.
• The US has threatened China with a further 50% tariff if it retaliates. China said today that it prefers to negotiate but will “fight to the end”. China is the world’s largest importer of crude and is likely to switch any flows from the US to other suppliers.
• While lower fuel prices may help US consumers, they are unlikely to encourage further drilling with the Dallas Fed estimating that average WTI needs to be $65 to make new wells profitable (Bloomberg).
• The EIA’s short-term energy monthly outlook will now be published on April 10, a delay from April 8. It said that it is “re-running” models to include the latest developments, according to Bloomberg.
• Today US industry-based inventory data is released. Also the Fed’s Daly, BoE’s Lombardelli and ECB’s Cipollone & de Guindos speak. US March NFIB small business optimism and Canada’s March Ivey PMI print.

NZGBs closed showing a dramatic bear-steepener, with benchmark yields 6-17bps higher. Nevertheless, yields closed well off session highs, particularly at the short end, This move aligned with richening in today's Asia-Pac session. NZGBs 16-20bps cheapening earlier in the session.  

• On a relative basis, NZGBs underperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 3bps and 7bps wider.
• Swap rates closed finished 4-11bps higher, with the 2s01 s curve steeper.
• Tomorrow, the local calendar will see the RBNZ Policy Decision, with consensus unanimous in expecting a 25bp cut to 3.50%.
• RBNZ dated OIS pricing closed 1-5bps firmer across meetings, with Feb-26 leading. 27bps of easing is priced for tomorrow, with a cumulative 98bps by November 2025.
• Christian Hawkesby will be the head of RBNZ for an initial six-month period while a permanent governor is sought. The Reserve Bank board has started the recruitment process to find a permanent governor who will serve for five years, with Hawkesby and Assistant Governor Karen Silk considered likely candidates. (per BBG)
• On Thursday, the NZ Treasury plans to sell NZ$275mn of the 0.25% May-28 bond and NZ$225mn of the 4.25% May-34 bond.

• RES 4: 132.80 High Feb 5               
• RES 3: 132.56 High Feb 28 and a key resistance        
• RES 2: 132.03 High Apr 7 and the bull trigger 
• RES 1: 130.57 50.0% retracement of Monday’s high-low range                     
• PRICE: 130.03 @ 05:30 BST Apr 8
• SUP 1: 129.83 50-day EMA        
• SUP 2: 129.15/128.47 20-day EMA / Low Mar 28            
• SUP 3: 127.74 Low Mar 25 and a key short-term support 
• SUP 4: 127.20 Low Mar 17   

Bund futures trading in a volatile manner Monday. For now, a bull cycle remains in play and a pullback is considered corrective. A fresh short-term cycle high yesterday signals scope for a continuation of the uptrend. The contract has cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This strengthens the bullish condition and opens 132.56, the Feb 28 high. Initial firm support to watch lies at 129.15, the 20-day EMA.