BONDS: NZGBS: Closed With A Modest Twist-Steepener, US Claims & PMI Data Due

JGB futures are holding weaker, -18 compared to the settlement levels.

• Outside of the previously outlined labour market and Tankan survey data, there hasn't been much by way of domestic drivers to flag.
• " The impact of the tariffs on Japan could range from minimal to severe, depending on whether the US focuses solely on agricultural tariffs or also includes value-added taxes and non-tariff barriers. Japan's response is unclear, but Prime Minister Shigeru Ishiba may seek to win concessions by relaxing non-tariff barriers to US imports rather than planning retaliation." (per BBG)
• Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's modest gains. Today's US calendar will be highlighted by JOLTS and ISM Mfg data.
• Cash JGBs are flat to 3bps cheaper, with a steepening bias, across benchmarks. The benchmark 10-year yield is 1.6bps higher at 1.506% versus the cycle high of 1.596%.
• Swap rates are little changed. Swap spreads are tighter.
• Tomorrow, the local calendar will see Monetary Base data alongside BoJ Rinban Operations covering 1-3-year and 25-years+ JGBs.

TYM5 is 111-17, +0-10 from closing levels in today's Asia-Pac session.

• According to MNI's technicals team, TYM5 remains well off the initial technical resistance of 111-22.5 (today's intraday high) - next resistance above at 112-01 (High Mar 4 and a bull trigger).
• Cash US tsys are slightly richer in today’s Asia-Pac session after small losses early.
• Month/quarter-end rebalancing flow tempered Monday morning's risk-off support ahead of Wednesday's US tariff deadline.
• From our latest US Treasury Deep Dive (Here) - the Treasury isn’t expected to raise the size of its coupon offerings until Q4 2025 at the earliest, with consensus on such a shift moving following the February refunding announcement to Nov 2025/early 2026, from Aug/Nov 2025 prior.
• Today’s US calendar will be highlighted by JOLTS and ISM Mfg data. 

USD/CNH sits back in 7.2750/60 region, up around 0.15% so far today, but within recent ranges. Monday's low in the pair came in at 7.2531, which also marked both month and quarter end. Onshore USD/CNY spot is a little higher as well, last near 7.2650, leaving CNH-CNY basis as positive. 

• USD/CNH remains within recent ranges and we are back above all key EMAs. We tested sub the 20, 50 and 100 day yesterday. The 200-day is further south near 7.2400. Note as well the simple 200-day MA, which is still near 7.2200, helped mark lows in March. Recent highs, towards the end of March were just above 7.2820.
• We are seeing a better onshore equity tone, albeit modestly, while Hong Kong shares are up over 1%. The better Caixin PMI print from earlier has been cited as a positive. This is yet to aid CNH though. The currency is also lagging a slightly softer USD tone against the majors, but aggregate moves are very modest.
• Focus remains on Wednesday's US reciprocal tariff announcement. Given China's large trade surplus with the US and tariffs already placed by the Trump Administration on China, further tariff hikes could work against the yuan.
• Still, Trump reiterated earlier today that some type of deal around TikTok was still possible. A weaker yuan may also weigh on relations with the US.
• In terms of the 1 month risk reversal level, it is still in positive territory, but above recent highs. 1 month implied vol was last at +4.4%, towards the bottom end of recent ranges (see the chart below). This fits with any upside in USD/CNH still being gradual rather than dramatic. It's a similar story for the 1 week equivalent, albeit with the risk reversal back in negative territory. 

Fig 1: USD/CNH - 1 month Risk Reversal & Implied Vol 

Source: MNI - Market News/Bloomberg