OIL: Rally Following Trade Deal News Leaves Crude Higher On The Week
Global oil markets have been concerned that increased protectionism would reduce global energy demand and so today’s news that the US will announce a trade deal Thursday morning US time has boosted prices today. The NY Times reported that the agreement is with the UK. WTI is up 0.8% to $58.55/bbl, close to the intraday high, and now up 0.6% this week. Brent is 0.8% higher at $61.60 after falling to $61.00 early in the session and is currently +0.5% on the week. The USD index is down 0.1%.
- The news of the first US trade deal will possibly add to optimism of a resolution to the current situation, which is particularly important ahead of the difficult US-China talks taking place this week. US President Trump said that he won’t reduce tariffs on China to smooth the start of negotiations, which are likely to focus on de-escalation rather than a deal.
- Supply remains in focus with OPEC announcing a +400kbd increase in output from June after +400kbd in April but the EIA cutting its 2025 US production forecast due to low prices driving less shale output. Talks continue with Iran and a deal there may allow an easing of sanctions on its oil exports. A truce in Ukraine still seems no closer and thus also a lifting of restrictions on Russia.
- Later US Q1 preliminary productivity/ULC, jobless claims and April NY Fed inflation expectations as well as German March IP print. The Bank of England is expected to cut rates 25bp to 4.25%.
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BONDS: NZGBS: Closed Cheaper But Mid-Range Ahead Of RBNZ Decision Tomorrow
NZGBs closed showing a dramatic bear-steepener, with benchmark yields 6-17bps higher. Nevertheless, yields closed well off session highs, particularly at the short end, This move aligned with richening in today's Asia-Pac session. NZGBs 16-20bps cheapening earlier in the session.
- On a relative basis, NZGBs underperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 3bps and 7bps wider.
- Swap rates closed finished 4-11bps higher, with the 2s01 s curve steeper.
- Tomorrow, the local calendar will see the RBNZ Policy Decision, with consensus unanimous in expecting a 25bp cut to 3.50%.
- RBNZ dated OIS pricing closed 1-5bps firmer across meetings, with Feb-26 leading. 27bps of easing is priced for tomorrow, with a cumulative 98bps by November 2025.
- Christian Hawkesby will be the head of RBNZ for an initial six-month period while a permanent governor is sought. The Reserve Bank board has started the recruitment process to find a permanent governor who will serve for five years, with Hawkesby and Assistant Governor Karen Silk considered likely candidates. (per BBG)
- On Thursday, the NZ Treasury plans to sell NZ$275mn of the 0.25% May-28 bond and NZ$225mn of the 4.25% May-34 bond.
BUND TECHS: (M5) Corrective Pullback
- RES 4: 132.80 High Feb 5
- RES 3: 132.56 High Feb 28 and a key resistance
- RES 2: 132.03 High Apr 7 and the bull trigger
- RES 1: 130.57 50.0% retracement of Monday’s high-low range
- PRICE: 130.03 @ 05:30 BST Apr 8
- SUP 1: 129.83 50-day EMA
- SUP 2: 129.15/128.47 20-day EMA / Low Mar 28
- SUP 3: 127.74 Low Mar 25 and a key short-term support
- SUP 4: 127.20 Low Mar 17
Bund futures trading in a volatile manner Monday. For now, a bull cycle remains in play and a pullback is considered corrective. A fresh short-term cycle high yesterday signals scope for a continuation of the uptrend. The contract has cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This strengthens the bullish condition and opens 132.56, the Feb 28 high. Initial firm support to watch lies at 129.15, the 20-day EMA.
CHINA: Bond Futures Retrace
- After three days of significant rally, China's bond futures are lower today.
- China's 10Yr bond future is lower by -0.27 at 108.913, having risen +0.605 yesterday.
- The recent rally has seen the 10YR break above all major moving averages, the nearest being the 50-day EMA of 108.13.
- China's 2YR bond future is lower by -0.05 at 102.60, touching the 100-day EMA of 102.6073 with the next key technical level the 200-day EMA of 102.58.
- Cash bonds are off too with the CGB 10YR at 1.66%, +2.5bps higher today.
