BONDS: NZGBS: Modest Twist-Flattening To Finish The Week, RBNZ Decision On Wed
NZGBs closed off bests, showing at twist-flattening, with benchmark yields 1bp higher to 2bps lower.
- Today’s supply saw solid demand across the lines with cover ratios ranging from 2.92x (Apr-29) to 3.33x (Apr-33).
- Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's rally. A light US calendar tonight with New Home Sales and Kansas City Fed Services Activity data due. The US markets will be closed for Memorial Day on Monday.
- Swap rates closed little changed.
- The local calendar will be empty for Monday and Tuesday next week ahead of the RBNZ Policy Decision on Wednesday. 25bps of easing is fully priced next week meeting.
- RBNZ-dated OIS pricing has seen little change across meetings compared to this time last week, with rates remaining 2–18bps above levels observed prior to the Q1 CPI release on April 17.
- However, following Tuesday’s RBA easing and dovish tilt, RBA OIS pricing has softened 8-17bps versus pre-RBA levels.
- As a result, the expected year-end policy rate differential between Australia and New Zealand has narrowed by approximately 16bps over the past week, currently sitting at +30bps.
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OIL: Crude Higher Again But Iran Outlook Highly Uncertain, US EIA Data Out Later
Oil prices have continued trending higher during APAC trading as risk appetite improved in relief following President Trump’s comments that he wouldn’t sack Fed Chair Powell and that China’s tariffs would finish below the current 145%. China is the world’s largest importer of crude. The USD index is off today’s high but still up 0.2%.
- WTI is 0.9% higher today to $64.23/bbl after a peak of $64.48 and is now up slightly this week but still down sharply in April. Brent is up 0.8% to $67.98 with gains above $68.00 unsustained but is currently steady on the week. The prompt spread structure is in bullish backwardation, according to Bloomberg.
- With demand/supply concerns persisting, US inventory data remain in focus. US industry-based figures showed a sharp drawdown in crude and both gasoline and distillate, suggesting demand remains solid which has contributed to today’s higher oil prices. The official EIA data is out later today.
- Significant uncertainty around the outlook for Iran’s oil exports persists after the US Treasury said there would be stricter enforcement of sanctions and introduced measures against an LPG magnate with a large shipping fleet. Iran’s foreign minister is headed to China following recent talks with the US. China is the main buyer of its oil.
- Later there is more Fedspeak with Goolsbee, Musalem, Waller, Hammack and Kugler appearing. US preliminary April S&P Global PMIs, March housing data and the Fed’s Beige Book are released. European April PMIs and euro area February trade print.
- The IMF/World Bank & G20 finance ministers/central bank governors meetings take place. The ECB’s Lane and Cipollone participate in panels and BoE’s Bailey and Breeden also appear, while BoE’s Pill speaks at another event.
GOLD: Tracking Lower For 2nd Straight Session, But Still Well Above Key Support
Gold made lows just under $3316 in the first part of trade, where liquidity was lighter amid strong USD gains. We stabilized since then but found selling interest above $3386. We last racked near $3340, still off 1.20% for the session.
- Gold has been moving in lock step with USD weakness recently, so it no surprise that we have corrected lower for bullion as USD sentiment has stabilized. Trump remarks, particularly around having no intention to fire Fed Chair Powell, has aided USD sentiment, but we sit off earlier highs though for the BBDXY index (last under 1224).
- Gold is still in a technical bullish uptrend though. Focus will be on re-testing $3500 on the upside. Initial firm support lies at $3163.5, the 20-day EMA.
ASIA STOCKS: All In The Green Amid Tariff Hopes/Trump Call On Powell
Asia Pac equity markets are all in the green, led by tech related plays and Hong Kong markets. We had strong cash gains in US markets on Tuesday, while US futures are firmly in the first part of Wednesday trade. Trump remarks have dominated sentiment, with the US President stating he had no intention of firing Fed Chair Powell (which has been a source of concern for markets recently), while also stating final tariff levels on China will be lower than the 145% that currently prevails. This followed reported comments from US Tsy Secretary Bessent that the tariff standoff is unsustainable, and he expects de-escalation with China.
- Eminis are up over 1.5%, but the contract has been unable to sustain +5400 levels. A move into 5500/5600 region would likely be needed to unnerve recent shorts for this benchmark. Nasdaq futures are +1.8% at this stage.
- Japan markets are up over 2% at this stage, with the NKY 225 trending back towards 35000. The Taiex has outperformed in Taiwan up nearly 4%, while the South Korean Kospi is up around 1.5%, above 2500 in index terms.
- Hong Kong markets have the HSI up 2.4% at the break, with the tech sub index over 3%.
- Despite appearing to soften his stance on China, onshore China markets are only a touch higher at this stage. The CSI 300 up +0.22%, lagging the gains seen elsewhere.
- Trends are slightly more modest in SEA markets, the Singapore Straits Times up around 1%, same too for JCI in Jakarta, +1.2%. Gains elsewhere though are under 1%, while Philippine markets are down slightly.
