BONDS: NZGBS: Closed Near Yield Lows, Curve Twist-Flattened
NZGBs closed showing a twist-flattener, with benchmark yields 4bps higher to 3bps lower. Nevertheless, all NZGB yields closed well off session highs after weaker-than-expected card spending data.
- Cash US tsys also assisted the move away from session yield highs. Cash US tsys are 2-3bps richer, with a steepening bias, in today's Asia-Pac session after Friday's heavy session.
- Last week, the US 10-year yield rose almost 50bps in 5 days, one of the biggest moves in that number of days since 1998. The US calendar is light this week, with the highlights being Retail Sales data and Fedspeak from Powell and Waller on Wednesday.
- Swaps closed mixed, with rates 3bps higher to 1bp lower. The 2s10s curve closed flatter.
- RBNZ dated OIS pricing closed 1-6bps firmer across meetings. 31ps of easing is priced for May, with a cumulative 79bps by November 2025.
- Tomorrow, the local calendar will see Food Prices and a speech from the RBNZ’s Chief Economist About Forecasting.
- On Thursday, the NZ Treasury plans to sell NZ$275mn of the 3.00% Apr-29 bond and NZ$225mn of the 4.25% May-36 bond.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
