BONDS: NZGBS: Closed Cheaper & At Worst Levels Ahead Of US Payrolls
NZGBs closed 7-9bps cheaper and at/near the session’s worst levels on a local data-light day.
- On a relative basis as well, NZGBs delivered a poor performance. With the NZ-US & NZ-AU 10-year yield differentials closing 4bps and 8bps wider, respectively.
- Cash US tsys are slightly mixed, with a steepening bias, after yesterday's heavy session.
- The focus is on today's Non-Farm Payrolls release. US Non-Farm Payrolls are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger-than-expected 177k in April (albeit one that was more than offset by negative revisions). The unemployment rate is widely expected to round to 4.2% again. Average hourly earnings are expected to rise 0.3% M/M after a softer than expected 0.17% M/M in April, with the workweek watched after a recent recovery from January's adverse weather lows. (See MNI US Payrolls Preview here)
- Swap rates closed 5-7bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 1-2bps firmer across meetings. 6bps of easing is priced for July, with a cumulative 32bps by November 2025.
- On Monday, the local calendar will see Mfg Activity data alongside a Radio NZ interview with RBNZ Chief Economist Paul Conway.
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FOREX: USD Struggling To Bounce
The BBDXY has had an Asian range of 1217.76 - 1220.50, Asia is currently trading around 1219. The USD continues to be sold on any rallies, Asia has seen a small bounce on the news of a US-China meeting to be held in Switzerland. MNI - The People's Bank of China, announced today a cut to the seven-day reverse repurchase rate to 1.4% from 1.5%. The PBOC also announced a reduction in the amount banks must own in reserve (known as the RRR) by 0.5% which is expected to see CNY1tn of long term capital released into the market. The market's focus will turn to the FOMC later today.
- EUR/USD - Asian range 1.1326 - 1.1375, Asia is currently trading 1.1350. Intra-day support is around the 1.1250 area, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3333 - 1.3382, Asia is currently dealing around 1.3350. Intra-day support is around the 1.3250 area, then the pivotal 1.30/31 support is next.
- USD/JPY - Asian range 142.45 - 143.31, has held most of its early gains in the Asia session. Can the FOMC be the catalyst to test the 140.00 area again ?
- USD/CNH - Asian range 7.1892 - 7.2265, the USD/CNY fix printed 7.2005. The PBOC cut has seen USD/CNH bounce from below 7.2000, currently trading 7.2215. Sellers should return back towards 7.2500.
- Cross asset : SPX +0.68%, Gold $3385, US 10-Year 4.31%, BBDXY 1219, Crude oil $59.64.
- Data/Events : SW CPI, Ger Factory orders, IT Retail sales, US FOMC
Fig 1: GBP/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
STIR: RBNZ Dated OIS Pricing Little Changed After Q1 Employment Report
RBNZ dated OIS pricing is flat to 3bps softer across meetings after the release of the Q1 Employment Report.
- There were some tentative signs in the Q1 labour market data that there is some stabilisation, but at weak levels. There was a 0.1% q/q rise in employment driven by a 2.2% q/q jump in part-timers, indicating a cautionary move back into hiring.
- While the unemployment rate was stable at 5.1%, better than consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus, the data is close enough to what the RBNZ expected in February, and another 25bp rate cut on May 28 remains likely.
- 26bps of easing is priced for May, with a cumulative 77bps by November 2025.
Figure 1: RBNZ Dated OIS Latest vs. Pre-Jobs Levels (%)
Source: MNI - Market News / Bloomberg
FOREX: Antipodean Wrap - AUD & NZD Give Back Early Gains
The Asian session started off on the front foot with US stocks bouncing on news that Scott Bessent and Jamieson Greer will hold trade talks with He Lifeng in Switzerland this week. Both the AUD and NZD have both given back their early gains over the Asian session to end smalls lower on the day. MNI Economist - NZ Labour : “There were some tentative signs in the Q1 labour market data that there is some stabilisation but at weak levels. While the unemployment rate was stable at 5.1%, better than consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus the data is close enough to what the RBNZ expected in February and another 25bp rate cut on May 28 remains likely.”
- AUD/USD - Asian range 0.6478 - 0.6515, the AUD is currently dealing around 0.6485. Support should be seen back towards 0.6350/6400, a break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 92.45 - 93.33, price goes into London trading around 92.80. Price continues to stall back towards the resistance seen around 94.00. Support seen back towards the 91.50/92.00 area.
- NZDUSD - Asian range 0.5989 - 0.6023, going into London trading around 0.5995. The NZD continues to hold up well, given the NZD seems to find bids in all scenarios for risk at the moment watch for this to gain momentum.
- AUD/NZD - Asian range 1.0800 - 1.0832, the Asian session is currently trading 1.0805. Sellers have returned back towards the 1.0850 area.
Fig 1 : AUD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
