BONDS: NZGBS: Closed Slightly Stronger, Subdued End To The Week

NZGBs closed 1-5bps cheaper, with a steeper curve, after the RBNZ left the cash rate unchanged at 3.25%. The decision was widely expected, with only 4bps of easing priced by the market. 

• (RBNZ) "Annual consumers price inflation will likely increase towards the top of the Monetary Policy Committee's 1 to 3 percent target band over mid-2025. However, with spare productive capacity in the economy and declining domestic inflation pressures, headline inflation is expected to remain in the band and return to around 2 percent by early 2026."
• The RBNZ considered two options at this meeting: to cut by 25bps or hold policy steady. The case to ease largely reflected concerns around faltering economic momentum. The case to hold won out, amid high uncertainty: The RBNZ noted: "Some members emphasised that waiting would allow the Committee to assess whether weakness in the domestic economy persists, and how inflation and inflation expectations evolve."
• Swap rates are 2-6bps higher on the day, flat to 4bps higher after the decision.
• RBNZ dated OIS pricing closed showing a cumulative 33bps of easing by November 2025.
• Tomorrow, the local calendar will see Net Migration data alongside the NZ Treasury's planned sale of NZ$250mn of the 3.00% Apr-29 bond and NZ$200mn of the 4.50% May-35 bond.

• After strong falls overnight, Gold has steadied in the Asia trading day modestly lower.  
• Gold opened the day at US$3,302.51 and is down -0.20% at $3,295.36.
• Last night's falls saw gold trend below major moving averages and today's weakness sees gold below the 50-day EMA of $3,299.39.

source: Bloomberg Finance LP / MNI 

• Below is the 100-day EMA of $3,191.92.  
• Brazil's exchange B3 SA is launching a new gold futures contract that will begin trading on July 21 amid a more than 25% year-to-date increase in the commodity that led it to a record high on April.

The Asia-Pac USD/JPY range has been 146.53 - 147.18, Asia is currently trading around 147.10, +0.35% having found decent demand and staying better bid throughout our session. USD/JPY price action is telling as it marches relentlessly higher, challenging a market positioned the wrong way. Price is now pushing towards the upper boundary of its 142.00 - 148.00 range, the pair will probably continue to take its cue from the US rates market which is also approaching some key pivot areas.

• (Bloomberg) - As the dollar recovers from an extended slump, its Japanese counterpart is falling out of favor among traders. One-week dollar-yen risk reversals -- which gauge the premium traders are willing to pay for call versus put options -- now trade at some 37 basis points in favor of Japan’s currency. That’s the least bullish level since October, and reflects growing jitters over Japan’s spending outlook ahead of the key upper house election later this month.”
• (Bloomberg) - “Junko Koeda, one of the BOJ’s newest board members, signaled a possible upward revision to the central bank’s inflation view this month. Such a move would keep open the possibility of another rate hike this year.”
• USD/JPY has lost all downside momentum for now and is back in its wider 142.00 - 148.00 range. The Market is long JPY and should the USD manage to continue to correct higher the risk is a move back to the top end of the range to further challenge the conviction of the shorts.
• Options : Close significant option expiries for NY cut, based on DTCC data: 144.50($860m).Upcoming Close Strikes : none.
• CFTC data shows Asset managers increased their JPY longs slightly +94753, while leveraged funds maintained their longs they have tried to rebuild +15798.

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P