BONDS: NZGBS: Closed At Session Bests After Paring Early Weakness
Jan-23 03:40
NZGBs closed at session bests, little changed on the day across benchmarks.
- Outside of the previously outlined Five-Month Budget Deficit and Net Migration, there hasn't been much by way of domestic drivers to flag.
- Today’s NZGB supply saw strong demand metrics, with cover ratios ranging between 2.94x to 3.93x.
- Invest NZ will streamline its process and provide tailored support to foreign investors, Prime Minister Christopher Luxon in his State of the Nation address in Auckland.
- Swap rates closed flat to 1bp higher.
- RBNZ dated OIS pricing is flat to 2bps firmer across meetings today but remains flat to 3bps softer than yesterday’s pre-Q4 CPI levels.
- BNZ believes that the data won’t change the central bank’s view as it also didn’t alter its own view of 50bp of easing in February. It sees a greater chance of 25bp than 75bp. BNZ also believes that the pace of easing will moderate to 25bp from April as inflation surprises to the upside.
- Tomorrow, the local calendar is empty, with the next release being Filled Jobs data on Tuesday.
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FOREX: USD Modestly Higher, Yen Pares Losses Post FinMin Warning
Dec-24 01:35
Early G10 FX trends are skewed towards the USD, albeit with modest moves overall. AUD and NZD are seeing some slight underperformance (which followed some outperformance on Monday). Rhetoric around FX moves has crossed from the Japan FinMin as well.
- The reaction so far from USD/JPY has been limited. We were last 157.15/20, close to unchanged for the session. Earlier highs were at 157.39.
- Japan FinMin Kato reiterated recent concerns on FX - "JAPAN FINMIN KATO: CONCERNED ABOUT RECENT FX MOVES, RTRS" "JAPAN FINMIN KATO: RECENTLY SEEING ONE-SIDED, SHARP FX MOVES" and that the authorities will take action against excessive moves.
- USD/JPY is still sub post BoJ highs (157.93), with these comments highlighting intervention risks as we approach the holiday period. Earlier the BoJ minutes from the Oct policy meeting came and went with little market reaction.
- AUD/USD sits down around 0.20%, last near 0.6235/40. Downside focus will rest on the 0.6199 low seen recently. The RBA minutes from the Dec meeting were out earlier. Upside risks to inflation have diminished but it was still too soon to be confident that inflation is sustainably at target.
- NZD/USD is also lower, last near 0.5635/40. Also, still up from recent cycle lows.
- Trends are biased in favour of the USD elsewhere, but aggregate moves are modest. In the cross asset space, US equity futures are down a touch, along with US yields, but again overall moves are modest.
- There is little in the way of further risk events for the remainder of today's Asia Pac session.
CHINA: Central Bank Drains Liquidity via OMO.
Dec-24 01:27
- PBOC issues CNY64.1bn of 7-day reverse repo.
- Today’s maturities CNY355.4bn
- Net Liquidity withdrawal CNY291.3bn.
- The PBOC controls liquidity in the interbank market through the daily issuance of reverse repo.
MNI: CHINA PBOC CONDUCTS CNY64.1 BLN VIA 7-DAY REVERSE REPOS TUES
Dec-24 01:24
- CHINA PBOC CONDUCTS CNY64.1 BLN VIA 7-DAY REVERSE REPOS TUES
