BONDS: NZGBS: Closed Cheaper With A Mixed Performance Versus $-Bloc 10Y
NZGBs closed 3-4bps cheaper, with the NZ-US 10-year yield differential 2bps wider and the NZ-AU 2bps tighter.
- RBNZ Chief Economist Paul Conway has delivered a speech earlier today in Wellington. It focused on the impact of tariffs. The key takeaway from a monetary policy standpoint is that Conway reiterated the recent monetary policy stance: "As outlined in the July Monetary Policy Review, the Committee sees scope to lower the OCR further if medium-term inflation pressures continue to ease as projected, Mr Conway says."
- "Global tariffs and economic uncertainty are likely to mean less inflation pressures in New Zealand and a pullback in business investment and household spending, RBNZ Chief Economist Paul Conway says. However, the economy is currently supported by high export prices and lower interest rates, he says."
- Today’s weekly supply showed strong demand metrics with cover ratios ranging from 2.78x (Apr-37) to 3.89x (Apr-29).
- Swap rates closed 2-5bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed little changed across meetings. 21bps of easing is priced for August, with a cumulative 37bps by November 2025.
- Tomorrow, the local calendar will be empty.
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FOREX: Asia FX Wrap - Market Very Quick To Resell The USD
The BBDXY has had a range of 1203.92 - 1207.36 in the Asia-Pac session, it is currently trading around 1204. The BBDXY has extended lower again in early Asian trading after President Trump's announcement of a ceasefire, BBDXY -0.30%. The price action overnight was very revealing and points to a market that is very quick to reinstate USD shorts with conviction high for a move lower. (Bloomberg) - The PBOC set the strongest yuan fixing since November, but it also signaled a reluctance to allow strong gains. The fixing also came in slightly above the estimate for the first time since June 13. This adds to the view that China is acceding to a sustained, gradual appreciation in its currency, as well as emphasizing the broader theme of USD weakness.”
- EUR/USD - Asian range 1.1575 - 1.1610, Asia is currently trading 1.1605. EUR support back towards 1.1450 proved solid once more and the swift turnaround in the USD has seen the EUR going into the London session above 1.1600. While the USD remains on the back foot the EUR will continue to find demand on dips.
- GBP/USD - Asian range 1.3506 - 1.3566, Asia is currently dealing around 1.3560. The GBP again found solid demand around its 1.3400 support and is now back to testing its previous highs back towards 1.3600 looking for the momentum to carry it through its weekly pivot.
- USD/CNH - Asian range 7.1704 - 7.1797, the USD/CNY fix printed 7.1656. Asia is currently dealing around 7.1780. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX +0.55%, Gold $3350, US 10-Year 4.34%, BBDXY 1204, Crude oil $66.65
- Data/Events : Ger IFO
Fig 1: GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
MNI EXCLUSIVE: BoJ's JGB Worries
MNI discusses the BOJ's JGB market concerns.
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NZD: Asia Wrap - NZD Back Above 0.6000
The NZD/USD had a range of 0.5963 - 0.6014 in the Asia-Pac session, going into the London open trading around 0.6005. The NZD has remained well supported all through the Asian session, +0.50%. With the USD back under pressure the NZD very quickly finds itself back on a 0.6000 handle, looking to build momentum for a test of the 0.6100 area.
- "NZ TREASURY: MAINTAINING ECONOMY MOMENTUM MAY BE CHALLENGING" - BBG
- “Among Group-of-10 commodity currencies, the Kiwi “is the only energy importer and most vulnerable if Middle East oil supply is impacted more severely,” wrote Bank of America.”
- A huge bounce from sub 0.5900 and we are again breaking back above the 0.6000 area this morning.
- Technically while the support around 0.5850 holds in NZD/USD it is still in an uptrend, this held perfectly overnight and should risk build on from this then focus will turn once gain back to 0.6050/0.6100.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5690(NZD621m June 25)
- CFTC Data showed Asset managers paring back their shorts slightly once more over the week, the leverage community did likewise.
- AUD/NZD range for the session has been 1.0798 - 1.0817, currently trading 1.0805. The cross is struggling to get any momentum back above 1.0800 for now, it needs to hold above here and start extending higher to put a higher low in place. The longer it fails to extend the higher the chances it begins to drift lower again, a break sub 1.0750 will see downward momentum return.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
