BONDS: NZGBS: Closed Little Changed As Early Weakness Reversed
NZGBs closed 1bp cheaper to 2bp richer after being 2-3bps cheaper early in the session following the negative lead-in from US tsys after yesterday's NY session.
- After initially plunging on the lower-than-expected US CPI data yesterday, US yields quickly rebounded to session highs, ending higher levels on the day. The 2-year yield was up by 4bps to 3.99%, while the 10-year yield rose to 4.31%, up 3bps.
- However, cash US tsys are 1-2bps richer in today’s Asia-Pac session ahead of today’s PPI and Jobless Claims data.
- NZ-US 10-year yield differential is 4bps lower at +28bps. Nevertheless, it currently sits near its widest level since November.
- Today’s supply saw very strong demand across the lines, with cover ratios ranging from 4.90x to 5.05x.
- “Electricity generated in the 4q was the lowest since 2016 amid lower demand from industrial users including the Tiwai aluminum smelter.” (per BBG)
- Swap rates closed showing a twist-flattening, with rates 3bps higher to 2bps lower.
- RBNZ dated OIS pricing closed flat to 4bps firmer. 25bps of easing is priced for April, with a cumulative 70bps by November 2025.
- Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI and Food Prices.
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AUD: A$ Slightly Weaker But Range Trading Ahead Of Wed’s US CPI
AUDUSD fell to a low of 0.6265 following the presidential signing of US tariffs on steel and aluminium imports to begin on March 4 and news that tariffs on chips, pharmaceuticals and cars would now be considered. The pair had risen to around 0.6285 following news of a constructive conversation between Australian PM Albanese and US President Trump. Trump then stated that Australia was being considered for an exemption. AUDUSD is now around 0.6272 to be down moderately on the day. The USD index is 0.1% higher.
- AUDUSD and A$ crosses are range trading as markets wait for Wednesday’s US January CPI data, which is forecast to show a steady headline at 2.9% but a 0.1pp dip in core to 3.1%.
- AUDJPY is 0.1% lower at 95.31 after a trough of 95.08. AUDEUR is slightly down to 0.6090 but off the intraday low of 0.6083. AUDGBP is steady around 0.5076.
- AUDNZD is little changed at 1.1127 after a high of 1.1138 as both Australian and NZ governments spoke to avoid being targeted by US tariffs.
- Equities are mixed with the ASX & Hang Seng up 0.1% but CSI 300 down 0.3% and S&P e-mini -0.2%. Oil prices are higher with WTI +0.3% to $72.55/bbl. Copper is down 0.4% and iron ore is higher at $107-108/t.
- Later US January NFIB small business optimism prints and Fed Chair Powell testifies to the senate and Fed’s Hammack, Williams and Bowman speak. Q4 French unemployment is released and the ECB’s Schnabel appears, and BoE’s Mann & Bailey speak.
MNI EXCLUSIVE: BoJ Consensus On Inflation & Wages Difficult
NEW ZEALAND: NZ More Vulnerable To US Tariffs Than Australia
NZ has come out today and reiterated its close relationship with the US. Its economy is more vulnerable to American protectionism than Australia though, as the US became NZ’s second most important export destination in 2024 overtaking Australia. 12.7% of total NZ exports go to the US compared with 4.6% for Australia, but still around half of that going to China at 25%. On the other side, the US runs a very small trade deficit with NZ of $1.1bn in 2024 and only 0.2% of its imports are from NZ and so it is unlikely to be a tariff target.
NZ merchandise exports by destination % total 2024
