BONDS: NZGBS: Closed With A Bear-Steepening Ahead Of US Payrolls

The BBDXY has had a range of 1207.93 - 1211.32 in the Asia-Pac session, it is currently trading around 1210. Robin Brooks on X: “Today's Dollar fall is worrying. It mirrors Dollar weakness in early April, when the Dollar (black) fell even as interest differentials of the US vis-à-vis the G10 (blue) were stable(see graph below). That kind of decoupling of the Dollar from rate differentials is unusual and a worrying sign.”  https://x.com/robin_j_brooks/status/1929653605440606282

• EUR/USD -  Asian range 1.1416 - 1.1455, Asia is currently trading 1.1420. EUR has drifted lower during the Asian session as US stock futures trade weaker. Dips should continue to find support, the demand back towards 1.1200 proved to be solid last week.
• GBP/USD - Asian range 1.3515 - 1.3559, Asia is currently dealing around 1.3520. The GBP is attempting another run higher but is struggling to gain any momentum on a 1.3500 handle. Look for an opportunity to buy again back towards the 13300/3400 area if seen.
• USD/CNH - Asian range 7.2016 - 7.241, the USD/CNY fix printed 7.1869. Asia is currently dealing around 7.1985. Sellers should be around on bounces while price holds below the 7.2500 area. 
• Cross asset : SPX -0.42%, Gold $3361, US 10-Year 4.43%, BBDXY 1210, Crude oil $62.81

• Data/Events : Spain Unemployment, Italy Unemployment, EC CPI

  Fig 1: DXY vs 2Y2Y FWD Rate

  

  Source - Robin Brooks via X

The Asia-Pac USD/JPY range has been 142.38 - 143.27, Asia is currently trading around 143.10. USD/JPY has had an unexpected bounce in our session as the BOJ Governor pushes back on being forced to raise rates. 

• (Dow Jones) via BBG - “The yen weakens against most other G-10 and Asian currencies in the morning session on possible dovish signs in BOJ Gov. Ueda's comments earlier. Ueda said that uncertainty, including on trade policy outlook, remains high and could remain so even after the tariffs are determined. Ueda said the central bank isn't predetermining rate decisions and won't push for rate increases just to make room for future rate cuts.”
• Bank of Japan Governor Ueda, speaking in parliament, said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants. Additionally, he pointed out that sharp movements in long-term yields could influence short-term rates.
• BOJ GOV UEDA: MINUTES OF BOJ'S MEETING WITH BOND MARKET PLAYERS SHOWED MANY THOUGHT IT WAS IMPORTANT FOR BOJ TO CONTINUE TAPERING BOND BUYING WHILE STRIKING BALANCE BETWEEN FLEXIBILITY AND PREDICTABILITY" RTRS
• The market seems very confident of a move lower in USD/JPY but with positioning quite large now we have seen the risk of pullbacks increase. Resistance around the 146.00 area held perfectly and the JPY bulls would be quite relieved as well as vindicated by the price action.
• The USD is looking like it is about to start another leg lower. A break below 142.00 in USD/JPY and all eyes will once again turn to the pivotal 140.00 area. Sellers should emerge on a bounce back towards the 144.00 area now.

• Options : Close significant option expiries for NY cut, based on DTCC data: 143.00($450m). Upcoming Close Strikes : 140.00($1.89b June 5), 140.00($1.13b June 6).

  Fig 1 : USD/JPY Spot Hourly Chart

  

  Source: MNI - Market News/Bloomberg

After the long weekend, NZGBs closed showing a twist-steepener, with benchmark yields 1bp lower to 4bps higher. 

• Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's sell-off. Today’s US calendar will see Factory Orders, Durable Goods Orders and JOLTS. Non-Farm Payrolls are due on Friday.
• (Bloomberg) - "Traders are buying into the stagflation narrative, with Monday's economic reports setting the tone for a week that culminates in the May jobs report. Against that backdrop, the path of least resistance is a steeper yield curve."
• "The Fed can proceed with rate cuts if uncertainty around trade policy is resolved, Austan Goolsbee said, adding that recent data showed "surprisingly little impact so far." Lorie Logan said risks to inflation and employment are balanced, implying the central bank can remain patient."(BBG)
• Swap rates closed 2bps lower to 3bps higher, with a steepener 2s10s curve.
• RBNZ dated OIS pricing closed little changed across meetings. 7bps of easing is priced for July, with a cumulative 30bps by November 2025.
• Tomorrow, the local calendar will be empty.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.50% May-35 bond and NZ$50mn of the 5.00% May-54 bond.