BONDS: NZGBS: Closed With A Twist-Flattener Ahead Of US CPI
NZGBs closed showing a twist-flattener, with yields 2bps higher to 1bp lower.
- Bloomberg - "New Zealand's annual net immigration fell to 21,317 in April, a two-and-a-half-year low, which could slow the country's economic recovery and lead to more interest-rate cuts."
- "The decline in net immigration is partly driven by New Zealand citizens leaving the country to seek better incomes, which could dampen demand and prompt the Reserve Bank to provide policy stimulus."
- Cash US tsys are little changed in today's Asia-Pac session ahead of today's CPI data.
- Focus has also been firmly on US-China trade talks, with headlines from London crossing earlier. The market reaction has been fairly muted, with the main outcome being agreement to move forward with what was agreed at the Geneva talks in May (although both US and Chinese leaders need to sign off on implementation).
- Swap rates closed showing a flatter curve, with yields 2bps higher to 2bps lower.
- RBNZ dated OIS pricing closed firmer across meetings. 4bps of easing is priced for July, with a cumulative 27bps by November 2025.
- Tomorrow, the local calendar will see Card Spending data, ahead of BusinessNZ Manufacturing PMI on Friday.
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STIR: RBA Dated OIS Dec-25 Pricing 25bps Firmer Than Pre-CPI Level
RBA-dated OIS pricing is 2-24bps firmer across meetings than levels before the release of Q1 CPI data on April 30.
- Q1 headline and underlying inflation printed 0.1pp higher than expected, but the trimmed mean at 2.9% y/y was below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
- The data was close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
- A 50bp rate cut in May is given a 2% probability (10% before the CPI data), with a cumulative 93bps (117bps before) of easing priced by year-end.
Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI
Source: MNI - Market News / Bloomberg
GOLD: Gold Falls Again as Optimism Grows
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
FOREX: Antipodean Wrap - AUD & NZD Outperform
The S&P is up 1.4% this morning after gapping on thin liquidity at the Asian open. It has held these gains remarkably well for now, with these early Monday morning moves having a habit of failing. There seems to be a view that the outcome of these talks could have significant implications going forward as China now sees itself coming to the negotiating table as a peer and not as a subordinate. Hu Xijin, former Editor-in-Chief of the Global Times, remarked in a recent Weibo post: “China has achieved the most equal negotiation with the United States among all nations. The two sides had been at loggerheads, but their first official contact yielded substantial results—an unexpected turn of events. I believe this breakthrough is precisely the result of China’s readiness to stand firm and its unwavering commitment to principle.” See this X link for more details https://x.com/ShanghaiMacro/status/1921759301284376957
- AUD/USD - Asian range 0.6410 - 0.6432, the AUD is currently dealing around 0.6435. AUD has outperformed this morning especially in the crosses. Good demand was seen on Friday sub 0.6400, on the day this could continue to provide support. A break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 93.40 - 93.99, price goes into London trading around 93.75. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- NZDUSD - Asian range 0.5910 - 0.5931, going into London trading around 0.5935. On the day there is potential for NZD to continue to outperform as the market digests an outcome from the talks that many thought not possible. First support is right here around the 0.5900 area but more importantly the support around 0.5800 needs to hold to keep the bulls in the drivers seat.
- AUD/NZD - Asian range 1.0833 - 1.0859, the Asian session is currently trading 1.0845. Sellers continue to provide headwinds for the cross just above 1.0850, a sustained move back above 1.0900 would negate the bearish trend.
Fig 1 : AUD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
