NEW ZEALAND: PMI Suggests Better Growth Ahead, Food, Petrol & Airfare Prices Dip
The earlier BusinessNZ manufacturing PMI rose to 53.9 in Feb, from a revised 51.7 print in Jan, see the chart below (plotted against GDP growth). This is the highest reading since August 2022 and continues to point to an underlying recovery in NZ's business cycle. Other data showed food prices dipping 0.5%m/m, after a 1.9% gain in Jan.
- On the PMI, all 5 sub indices are above 50 (per BBG), with the production gauge up to 52.4, employment at 54.
- BNZ stated: 'It is one of several indicators that suggests the broader economy is turning for the better. Indeed, it indicates the pickup may be a bit faster than we are currently forecasting. Still that stressed: "It is important to remember that any improvement in activity is coming from a weak base. Recent official data confirmed weak manufacturing sales in 4q last year". (via BBG).
- On food prices, the Feb drop was the largest since Oct last year. Still in y/y terms we edged up to 2.4%, from 2.3% in Jan.
- In terms of the other details, were saw petrol prices down 0.2% (after rising 4.0% in Jan), domestic and international air travel fell for the second straight month as well. Accommodation services were up 3.2% though in m/m terms.
- All of these segments, except for domestic air travel, are negative in y/y terms though.
Fig 1: NZ Business NZ PMI Versus GDP Growth
Source: BNZ-Business NZ/Market News- MNI/Bloomberg
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CNH: CNH Lags Softer USD Indices, Equity Rebound Stalls
USD/CNH was little changed through the course of Tuesday trade, not drifting too far from the 7.3100 handle. This underperformed the softer USD index trends, with the DXY and BBDXY moving lower, as EU related currencies (led by GBP) rose amid firmer core yields. Spot USD/CNY finished up at 7.3069 in Tuesday trade, also largely flat lining like USD/CNH. The CNY CFETS basket tracker was little changed at 100.71 (per BBG).
- For USD/CNH technicals, little has changed. The 20-day EMA support point is close to 7.3000. Upside focus is likely to rest on Feb 4 highs at 7.3365. Implied vol for the 1 month tenor continues to track lower, last at 4.60%, levels last seen in early Dec 2024.
- CNH underperforming the USD index pullback fits with a firmer core yield backdrop from Tuesday's session. JPY and CHF were the weakest performers in the G10 space.
- Higher core yields, following some hawkish BoE rhetoric and Fed Chair Powell staying the course, has pushed yield differentials against CNH, but we remain sub recent highs. With quite steady onshore CGB yields, yield differentials will continue to be driven by the US leg, from a US-CH standpoint.
- Relative equity trends are painting a more optimistic picture for CNH, although Tuesday saw onshore equities finish down, while the Golden Dragon index lost 1.66%, its first fall in 4 sessions.
- On the data front we still await Jan new loans/aggregate finance figures.
BONDS: NZGBS: Cheaper With US Tsys After An Uneventful NY Session
In local morning trade, NZGBs are 1-3bps cheaper after US tsys bear-steepened, with yields 1-4bps higher.
- Many listened from the sidelines as Fed Chairman Powell repeated his January FOMC press conference at his Senate Banking Committee testimony today. Expect similar at Wednesday's testimony to the House.
- Treasury futures bounced briefly but finished weaker after the $58bn 3Y note auction drew a 4.300% high yield vs. 4.312% WI.
- Focus on key CPI inflation data today at 0830ET.
- The ANZ light traffic index rose 1% m/m in January, while the heavy traffic gauge jumped 4% m/m.
- “Westpac sees NZ inflation accelerating to a peak of 2.7% in the 3q this year, according to new forecasts published Wednesday. Previously saw inflation peaking at 2.3% in 3q.” (per BBG)
- Swap rates are flat to 2bps higher.
- RBNZ dated OIS pricing is unchanged. 49bps of easing is priced for February, with a cumulative 121bps by November 2025.
- Today, Treasury Chief Economic Adviser Dominick Stephens will deliver a presentation titled ‘The State of the Economy’ at 0930 NZT. The next data release is Card Spending tomorrow.
ASIA: Government Bond Issuance Today.
- Malaysia to Sell MYR5 Billion 2031 Bonds
- Bank of Korea to Sell 500 Billion Won 1-Year Bonds
- South Korea to Sell 2 Trillion Won 63-Day Financial Bills
- Vietnam To Sell VND 1.0Tln 2040 Bonds; (TD2540037)
- Vietnam To Sell VND 0.5Tln 2055 Bonds; (TD2555052)
- Vietnam To Sell VND 10.0Tln 2035 Bonds; (TD2535022)
- Vietnam To Sell VND 0.5Tln 2029 Bonds; (TD2429008)
- India to Sell 80 Billion Rupees 364-Day Bills
- India to Sell 80 Billion Rupees 182-Day Bills
- India to Sell 120 Billion Rupees 91-Day Bills
