BONDS: NZGBS: Cheaper After Longer-Dated US Tsys Traded Heavy Post-Payrolls
In local morning trade, NZGBs are 3bp cheaper after US tsys traded heavily into the Friday close, shrugging off an initial rally posted off the back of a softer-than-expected average hourly earnings release.
- US non-farm payrolls increased by an above-consensus 187k in August but with the previous 2 months revised lower by a total of 110k. The unemployment rate unexpectedly increased to 3.8%. Average hourly earnings rose 0.2% m/m, below the consensus of 0.3%.
- Supply dynamics outweighed any softening in OIS-implied Fed rate path expectations. US 2y yields were broadly unchanged, 10y yields added 7bp, while 30y yields added as much as 10bp before fading modestly.
- Swap rates are 2bp higher.
- RBNZ dated OIS pricing is unchanged.
- The local election campaign is now in full swing, with cost of living/inflation pressures as the key focus point (See link)
- Today the local calendar sees Terms of Trade (Q2), ahead of ANZ Commodity Prices (Aug) tomorrow, Volume of All Buildings (Q2) on Wednesday and Mfg Activity (Q2) on Thursday.
- This week (Thursday) the NZ Treasury plans to sell NZ$225mn of the 4.5% May-30 bond, NZ$175mn of the 2.0% May-32 bond and NZ$100mn of the 2.75% Ap-37 bond.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
USDCAD TECHS: Approaching Key Resistance
- RES 4: 1.3462 High Jun 5
- RES 3: 1.3441 61.8% retracement of the May 26 - Jul 14 downleg
- RES 2: 1.3427 High Jun 7
- RES 1: 1.3387 High Jul 7 and a key resistance
- PRICE: 1.3358 @ 15:50 BST Aug 4
- SUP 1: 1.3244 20-day EMA
- SUP 2: 1.3151/3093 Low Jul 31 / 14 and the bear trigger
- SUP 3: 1.3084 1.618 proj of the Apr 28 - May 8 - May 26 price swing
- SUP 4: 1.3032 1.764 proj of the Apr 28 - May 8 - May 26 price swing
USDCAD short-term conditions have improved for bulls following this week’s strong recovery. Resistance at the 50-day EMA, which intersects at 1.3287, has been cleared. The move higher signals scope for a test of the next key resistance at 1.3387, the Jul 7 high. A break of this level would strengthen bullish conditions. Key support has been defined at 1.3093, the Jul 14 low. Initial support to watch lies at 1.3244, the 20-day EMA.
AUDUSD TECHS: Trading Closer To This Week’s Lows
- RES 4: 0.6900 High Jun 16 and a bull trigger
- RES 3: 0.6847 High Jul 20
- RES 2: 0.6821 High Jul 27
- RES 1: 0.6630/6703 High Aug 2 / 50-day EMA
- PRICE: 0.6592 @ 15:47 BST Aug 4
- SUP 1: 0.6514 Low Aug 3
- SUP 2: 0.6485 Low Jun 1
- SUP 3: 0.6458 Low May 31 and a bear trigger
- SUP 4: 0.6403 76.4% retracement of the Oct 13 ‘22 - Feb 2 bull leg
AUDUSD bears remain in the driver’s seat despite a Friday bounce. The pair is trading closer to this week’s lows. Price has recently breached both the 20- and 50-day EMAs, reinforcing current conditions. Wednesday’s move lower resulted in a break of support at 0.6596, the Jun 29 low, as well as 0.6562, 76.4% of the Oct 13 ‘22 - Feb 2 bull leg. This opens 0.6458, the May 31 low and bear trigger. Initial firm resistance is seen at 0.6703, the 50-day EMA.
US TSYS: Bonds Extending Late Highs
- After briefly paring post-NFP highs at midmorning, Tsy futures continued to extend session highs into the close, curves bull flattening/unwinding some of Thu's move (3M10Y -12.886 at -136.364; 2Y10Y -3.107 at -73.910) with intermediate to long end rates outperforming (USU3 +2.05 at 128-09, 30YY 4.1997% low).
- Fast two-way trade was reported after this morning's July employment data came out slightly lower than expected at +187k vs. 200k est, June down-revised by -49,000. Average hourly earnings, on the other hand, were stronger than expected, rising 0.42% M/M (cons 0.3) after an upward revised 0.45% (initial 0.36% M/M) which was only marginally offset by a lower 0.33% in May (initial 0.36%).
- Rates continued to angle higher amid dovish comments from unscheduled Fed speakers Bostic "US JOBS NUMBERS CAME IN AS EXPECTED; I'M COMFORTABLE" and Goolsbee "SHOULD START THINKING ABOUT HOW LONG TO HOLD RATES" underscoring, if not exactly providing a bid to the rally.
- Cross-asset gains at midday: stocks near highs (ESU3 +28.0 at 4550.0; Crude firm (WTI +1.05 at 82.60), Gold firmer (+8.65 at 1942.7.
- Slow start to next week's data with the first significant release next Thursday with CPI and weekly Claims.
