BONDS: NZGBS: Closed With A Bull-Flattener
NZGBs closed showing a solid bull-flattener, with benchmark yields 4-9bps lower.
- With the NZ-US and NZ-US 10-year yield differentials little changed on the day, today’s move looks to have been driven from abroad.
- Cash US tsys are flat to slightly cheaper, with a flattening bias, in today's Asia-Pac session. Today's US calendar: Initial Jobless Claims and $22 Bln 30-year bond auction.
- Today’s weekly supply showed cover ratios ranging from 2.64x (Apr-29) to 3.50x (May-35).
- Swap rates closed 3-8bps lower, with the 2s10s curve flatter.
- MNI RBNZ Review (see link): The central bank considered cutting rates, largely due to concerns around faltering economic momentum. However, with near term inflation pressures expected to be firmer, the case to hold presented a more compelling argument. The central bank maintained an easing bias, subject to medium-term inflation pressures subsiding. Note Q2 CPI data prints on July 21.
- RBNZ dated OIS pricing closed little changed across meetings. 18bps of easing is priced for August, with a cumulative 33bps by November 2025.
- Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI.
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BONDS: NZGBS: Closed With A Modest Bull-Flattener, Net Migration Data Tomorrow
NZGBs closed showing a modest bull-flattener. Benchmark yields finished at their lows, 1-2bps lower, on a local data-light session.
- (Bloomberg) -- "Economists at ANZ Bank New Zealand and ASB Bank have raised their 1q economic growth forecasts, adding to signs the RBNZ may be justified in pausing interest rate hikes next month, according to emailed notes. ANZ expects the June 19 report will show GDP grew 0.7% after provisionally projecting 0.6%."
- " NZ Treasury expects growth impulse from net exports will wane” - BBG.
- Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's modest rally.
- Bloomberg - "Senator Ted Cruz has proposed eliminating the interest paid to banks that deposit cash at the Federal Reserve, which could save the government around $1 trillion over a decade."
- "JPMorgan strategists warn that this move could significantly impact banks' profitability, liquidity management strategies, and short-term interest rates, and risk the Fed losing control of money market rates."
- RBNZ dated OIS pricing closed with 4bps of easing priced for July and a cumulative 29bps by November 2025.
- Tomorrow, the local calendar will see Net Migration data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.25% May-36 bond.
GOLD: Gold Down Today As Risk Sentiment Improves With Ongoing Trade Talks
Gold prices reached $3327.96 early in the session up from Monday’s close of $3326.19, but trended lower thereafter falling to $3302.03. It has stabilised between $3304-3310 and is currently down 0.7% to $3305.0. The stronger US dollar (USD BBDXY +0.2%), little change in US yields and stronger equity markets have weighed on bullion in today’s APAC trading. US-China trade talks are continuing today and hopes of a deal are impacting safe-haven flows.
- Export controls are the focus of the US-China talks in London. There appears a willingness for the US to ease restrictions on tech exports if China eases rules on rare earths. Gold prices stabilised once trade negotiations began and the US delayed duties but official progress is needed for them to moderate again with any set back likely to drive a resumption of flight-to-quality flows.
- Silver is also weaker down 0.7% to $36.50 after falling to $36.31 from a high of $36.83. It broke above initial resistance at $36.71 briefly.
- Equities are generally stronger with the Hang Seng up 0.3%, TAIEX +2.1% and S&P e-mini +0.3%. Oil prices are moderately higher with WTI +0.1% to $65.37/bbl. Copper is down 1.0%, while iron ore is off its lows to be around $94-95/t.
- Later US May NFIB small business optimism and UK April/May labour market data are released. ECB’s Donnery and Buch appear. The focus remains on Wednesday’s May US CPI data but also Thursday’s US long-dated Treasury auction given fiscal concerns.
FOREX: Asia Fx Wrap - The USD Bounces With Stocks
The BBDXY has had a range of 1208.71 - 1212.46 in the Asia-Pac session, it is currently trading around 1211. “Rachel Reeves will announce a “housing bank” as early as Wednesday to deliver cheaper financing to housebuilders, the FT reported”(BBG). “Thames Water’s senior creditors submitted a rescue plan to the UK’s water industry regulator, envisaging £5 billion of fresh funds and hefty losses for the utility’s debt holders.”(BBG)
- EUR/USD - Asian range 1.1386 - 1.1436, Asia is currently trading 1.1395. EUR has drifted lower during the Asian session as the USD bounces in response to the move higher in US stocks. Dips should continue to find demand, first support around 1.1350 then the 1.1100/1200 area.
- GBP/USD - Asian range 1.3520 - 1.3564, Asia is currently dealing around 1.3535. The GBP is attempting another run higher but is struggling to gain any momentum above the pivotal 1.3500 weekly pivot. Support seen back towards 1.3400 and then 1.3200.
- USD/CNH - Asian range 7.1778 - 7.1864, the USD/CNY fix printed 7.1840. Asia is currently dealing around 7.1860. Sellers should be around on bounces while price holds below the 7.2500 area.
- Cross asset : SPX +0.35%, Gold $3303, US 10-Year 4.48%, BBDXY 1211, Crude oil $65.41
Data/Events : Italy Industrial Production
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
