BONDS: NZGBS: Flatter Curve In Line With Global Moves
NZGB yields sit 3-6bps weaker across the benchmarks, led by the back end. The 2yr remains under 3% last around 2.95% (off 3bps). The 10yr was back close to 4.40%, off nearly 6bps. Markets gaped lower around the open, in yield terms, and price action since then has been fairly muted. The NZ 2/10s curve is slightly flatter at +145bps. These moves largely reflect offshore developments from Wednesday.
- The 2yr swap rate is around 2.75%, off a little over 2bps. Recent lows rest at 2.706%, from late August.
- On the data front, we had Q2 volume of all building work print earlier. This fell 1.8%q/q, against a -1.0% forecast. Q2 was revised higher to a +1.3% gain though, after initially being reported as flat.
- We get more Q2 activity data next week, with manufacturing figures due on Tuesday. Q2 GDP isn't out though until Sep 18.
- Via BBG: "New Zealand sold NZ$225 million ($132.2 million) of bonds due May 15, 2035 on Sept. 4 (bid to cover was 2.96), also " New Zealand sold NZ$225 million ($132.2 million) of bonds due May 15, 2030 on Sept. 4." via BBG (bid to cover was 4.38).
- Tomorrow the data calendar is empty.
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US TSYS: Asia Wrap - Yields End A Little Higher, Led By The Front-End
The TYU5 range has been 112-10 to 112-15+ during the Asia-Pacific session. It last changed hands at 112-11, down 0-01 from the previous close.
- The US 2-year yield has edged higher trading around 3.696%, up 0.02 from its close.
- The US 10-year yield has moved higher trading around 4.20%, up 0.01 from its close.
- US TSY FLOWS BLOCK: 4000 of FVU5 traded at 109-03+. The contract is currently trading at 109-03, -0-01+ from closing levels.
- The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area.
- Bloomberg - “The Fed may need more than two rate cuts this year, Mary Daly told Reuters. “I was willing to wait another cycle, but I can’t wait forever,” she said.”
- “The rally in US government debt was muted, as investors braced for heavy supply this week of $125 billion in new three-, 10- and 30-year bonds. ” - BBG
- David Rosenberg on X: “The virtual stalling-out in payroll growth in the past three months has been a recession predictor with 100% accuracy over the past six decades. Score a win for Bowman and Waller, whose crystal balls are clearer than the rest of the FOMC pack.”
- Data/Events: Trade Balance, S&P Global PMI’s, ISM Services
Fig 1: 10-Year US Yield 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
JGBS AUCTION: Poor Demand Metrics For 10Y Auction
The 10-year JGB auction delivered weak results, with the low price failing to meet expectations at 100.21, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.0592x from 3.5070x, and the tail lengthened to 0.14 from 0.03.
- This performance came with an outright yield 5bps higher than last month but approximately 15bps below the recent cyclical high of 1.616%.
- The recent improvement in investor sentiment toward longer-dated global bonds failed to support the bid tone.
- However, in early afternoon Tokyo trading, the cash 10-year JGB is little changed from pre-auction levels after reversing an initial weakening. JGB have had a similar response.
CHINA: Bond Futures Up in Morning Trading
- China's bond futures are up in the morning session, following on from yesterday's gains of +0.04.
- The 10-year is up +0.06 at 108.55, nearing the 20-day EMA of 108.57.
- The 2-year future is up +0.01 at 102.36 after finishing out Monday flat for the day. The 2-year is nearing the 20-day EMA of 102.38 which it last traded through in early July.
- Bonds are stable with the CGB 10yr 1.70%
