BONDS: NZGBS: Closed At Best Levels Ahead Of ANZAC Day Holiday

In today's Asia-Pac session, TYM5 is 110-19, +0-01+ from closing levels.

• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Today's US calendar will see Philadelphia Fed Non-Manufacturing, Richmond Fed Mfg, House Prices, New Home Sales and Building Permits data, as well as, Fedspeak from Kugler and Williams.
• Yesterday, concession building ahead of the $183bn in auctions this week added to the selloff, as did the somewhat hawkish comments from the Fed's Bostic.
• Atlanta Fed Pres Bostic (non-2025 FOMC voter) said in a Bloomberg interview that he has reduced his 2025 rate cut expectations to 1 in March's economic projections versus 2 previously, "because I think we will see inflation be very bumpy", and delayed inflation progress warranted pushing back the path to neutral rates.

• Markets appear to be adjusting on the idea that the next round of tariffs from the Trump administration may not be as harsh as the first.
• It now appears a more targeted approach may be coming with the President suggesting that he may give a lot of countries a ‘break on levies.’
• If gold's price action as a safe haven investment is anything to go by, the risk of tariffs and the ensuing trade war has seen a 15% gain year to date.
• Gold opened at US$3,011.04 and despite a lackluster start to the day, bounced in afternoon trade to reach $3016.00
• Gold remains trading above all major technical moving averages with the closest being the 20-day EMA at 2,969.25.
• All key moving averages remain upward sloping, a sign that the bullish sentiment still has some momentum.

G20 inflation moderated around 2pp over the 12months to January and it now stands at 4.8%. Concerns are growing over the inflationary impact of US tariffs but that remains highly uncertain as it is not yet clear whether they will be imposed broadly across countries and sectors, size of second round effects and what retaliation there will be. Developments in other global prices so far this year are mixed but are unlikely to cause concern.

• The NY Fed’s global supply chain pressure index has been fairly stable since mid-2024. It rose slightly in February but remained marginally negative signalling that supply chain pressures are close to neutral. However, it is no longer putting downward pressure on global inflation.
• Shipping rates have been mixed in March with the Baltic Freight Index sharply higher, which may reflect contract renewals, but still down 30.5%y/y but the FBX global container index is significantly weaker and down 22.9% y/y with rates from China to both the Mediterranean and North American east coast lower. 

G20 CPI y/y% vs container rate

• After a prolonged period of deflation, the annual rate in FAO food prices turned positive in September and has trended higher since. In February, it rose 1.6% m/m and 8.2% y/y, highest since August 2022. The monthly increase was broad-based but annual strength is concentrated in dairy and oils. Cereals rose 0.7% m/m but were still down 1.1% y/y in February and they could fall in March with rice prices down on the month. They are down around 25% y/y helping to reduce Asian headline inflation.
• Industrial commodities are mixed with metal prices higher rising 3.4% m/m in March to be up 12% y/y but iron ore down 4.2% m/m and 6% y/y. After being weak for some time, wool is recovering up 3.1% m/m, sixth straight rise, to be up 7% y/y, but remains well below pre-Covid levels.

G20 CPI y/y% vs food & oil prices

Source: MNI - Market News/Refinitiv