BONDS: NZGBS: Closed With A Bull-Flattener Ahead Of Easter W/E
Apr-17 04:53
NZGBs closed showing a bull-flattener, with benchmark yields flat to 6bps lower. While the 10-year closed near bests, the 2-year finished 6bps cheaper than the session's best levels.
- The NZ-US 10-year yield differential finished 4bps tighter at +22bps.
- Cash US tsys are 2-4bps cheaper in today's Asia-Pac session after yesterday's solid rally.
- Domestically, Q1 inflation printed higher than expected at 0.9% q/q, bringing the annual rate to 2.5% up from 2.2% in Q4. However, the RBNZ's measure of underlying inflation from its sector factor model printed at 2.9% in Q1 after 3% in Q4, which was revised 0.1pp lower. Core inflation is now just under the top of the RBNZ's 1-3% target band and its lowest rate since Q2 2021.
- Today’s sale of NZ$275mn of the 3.00% Apr-29 bond and NZ$225mn of the 4.25% May-36 bond showed cover ratios of 3.20x to 4.00x, respectively.
- Swap rates closed flat to 4bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed flat to 2bps firmer across meetings after the release of Q1 CPI data. 27bps of easing is priced for May, with a cumulative 79bps by November 2025.
- The local market is closed until Tuesday for the Easter weekend.
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AUSSIE BONDS: Slightly Mixed, FOMC Decision (Wed) & Feb Jobs (Thu)
Mar-18 04:42
ACGBs (YM -1.0 & XM +1.5) are slightly mixed.
- Assistant Governor (Economic) Hunter spoke at the AFR banking summit about how monetary policy can be both forward-looking and data dependent given decisions are always made under uncertainty. The bank looks at the signal from data excluding the noise and uses that in determining its outlook which is then analysed under various scenarios and judgments.
- Cash US tsys are 1-2bps richer, with a steepening bias, after yesterday’s twist-flattening. The focus is on Wednesday’s FOMC decision. The majority of analysts expects the FOMC to leave its Dot Plot funds rate medians unchanged in March compared with the December meeting.
- Cash ACGBs are flat to 2bps richer with a flattening curve. The AU-US 10-year yield differential is at 10bps.
- Swap rates are flat to 1bp lower, with the 3s10s curve flatter.
- The bills strip is flat to -2.
- RBA-dated OIS pricing is flat to 2bps firmer across meetings today.
- Tomorrow, the local calendar will see Westpac Leading Index ahead of Thursday’s jobs data for February.
- The AOFM plans to sell A$800mn of the 4.25% 21 December 2035 bond tomorrow and A$700mn of the 2.75% 21 November 2029 bond on Friday.
US TSYS: Cash Bonds Slightly Richer, Focus On Tomorrow's FOMC
Mar-18 04:32
In today's Asia-Pac session, TYM5 is 110-23+, +0-04 from closing levels.
- Cash US tsys are 1-2bps richer, with a steepening bias, after yesterday’s twist-flattening. Yields finished 3bps higher to 3bps lower, pivoting at the 7-year.
- US tsy yields rose to their daily highs after Retail Sales data was released, with the market focusing more on the stronger control group sales, but the move wasn’t sustained and yields subsequently tracked lower.
- The focus remains on Wednesday's FOMC policy announcement. The majority of analysts expects the FOMC to leave its Dot Plot funds rate medians unchanged in March compared with the December meeting. That would imply the Fed is still pencilling in 50bp of cuts in 2025 (to 3.9%) and 2026 (to 3.4%), with a further 25bp cut in 2027 (to 3.1%).
- The BoJ Policy is also due tomorrow Japan time. The BoJ is expected to keep its policy rate at 0.50% in March, with no urgency for another hike after its January increase.
BONDS: NZGBS: Subdued Session, FOMC Decision (Wed) & Q4 GDP (Thu)
Mar-18 04:00
NZGBs closed little changed after dealing in relatively narrow ranges in today’s data-light local session.
- NZ-US and NZ-AU 10-year yield differentials closed 1-2bps wider.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session. The focus is on Wednesday’s FOMC decision.
- Swap rates closed unchanged after dealing 1-2bps higher earlier.
- RBNZ dated OIS pricing closed flat to 2bps firmer across meetings, with late 2025 leading. 24bps of easing is priced for April, with a cumulative 63bps by November 2025.
- Tomorrow, the local calendar will see Q1 Westpac Consumer Confidence and Q4 Current Account Balance data ahead of Q4 GDP on Thursday.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.0% May-54 bond.
- The RBNZ will start the repurchase program of the Sep-25 inflation-indexed bond on March 21. The operation has no implications for monetary policy stance.
