BONDS: NZGBS: Closed With A Bear-Flattener But Off Worst Levels
NZGBs closed showing a bear-flattener, with yields 2-6bps higher. NZGBs did, however, finish off the session’s worst levels.
- Today’s supply saw solid demand, with cover ratios of 3.27x (May-36) to 3.54x (May-30).
- Swap rates closed 5-7bps higher.
- RBNZ Governor Hawkesby just spoke with Bloomberg today and reiterated that the message at yesterday’s press conference was not to assume that a July rate cut is programmed into the MPC’s thinking.
- Elevated uncertainty means that there could be many different paths from here, which is why the central bank presented different scenarios in its May Monetary Policy Statement.
- ANZ business confidence fell to 36.6 in May from 49.3, the lowest since July, while the outlook moderated to 34.8 from 47.7. The survey suggests a gradual, soft recovery with higher costs difficult to pass through, which ANZ believes will allow the RBNZ to cut rates to 2.5%.
- RBNZ-dated OIS pricing is 10-13bps higher across meetings compared to yesterday’s pre-RBNZ decision levels.
- Markets had fully priced in yesterday’s 25bp cut ahead of the decision, with a total of 64bps of easing expected by November 2025. That has now adjusted to 50bps, inclusive of yesterday’s move.
- Tomorrow, the local calendar will see ANZ Consumer Confidence data.
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Historical bullets
BUND TECHS: (M5) Key Resistance Remains Exposed
RES 4: 133.90 1.236 proj of the Mar 25 - Apr 7- 9 price swing
- RES 3: 133.00 round number resistance
- RES 2: 132.56 High Feb 28 and a key resistance
- RES 1: 132.03 High Apr 7 and the bull trigger
- PRICE: 131.24 @ 05:31 BST Apr 29
- SUP 1: 130.70/129.92 20-day EMA / Low Apr 11
- SUP 2: 129.02 Low Apr 10
- SUP 3: 128.60 Low Apr 9 and a key support
- SUP 4: 128.47 Low Mar 28
Bund futures have pulled back from their recent highs. Despite the latest move down, a bull cycle remains in play and the sell-off between Apr 7 - 9 is considered corrective. Attention is on resistance at 132.03, the Apr 7 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 132.56, the Feb 28 high. Firm support lies at 128.60, the Apr 9 low. A break of this level would alter the picture.
MNI EXCLUSIVE: MNI Discusses The Outlook For Further BoJ Hikes
CNH: USD/CNH Tests Sub 7.2700, Outperforms Firmer USD Index Levels
USD/CNH sits a touch up from session lows. We were last near 7.2740, against earlier lows of 7.2692. Still, CNH is up close to 0.15%, while onshore spot has risen close to 0.20% and tracks near similar levels to USD/CNH. This is outperforming the stronger USD trend against the majors so far today. The BBDXY index is up around 0.20%.
- For USD/CNH technicals we are close to the 100-day EMA, while further south is the 200-day at 7.2535.
- BBG reported that a survey of exporters pointed to a greater conversion of earnings back into local currency (see this link). Also note that the holiday period kicks off this Thursday and runs through to next Monday (the Labor day holiday period). Such flows may also be more prominent near end April as well.
- In the cross asset space, equity sentiment is very steady, the CSI 300 remaining sub 3800 at this stage.
- Tomorrow, we get the PMI prints, with market expectations skewed towards weaker prints.
