US TSYS: Retreating From Session Highs
Tsys have ticked away from session highs, this came alongside the USD extending losses as an offer in USD/JPY spilled over into broad based greenback weakness. Ranges do remain narrow in tsys, as the earlier move higher had little follow through. Cash tsys sit flat to 1 bps richer across the major benchmarks, the curve is marginally flatter. TYU3 deals at 111-11+, +0-03, a narrow 0-04+ range has been observed thus far.
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NZD: Global Equities & 10 Year Yield Differentials Dominant Drivers Last Week
NZD/USD correlations with global equities and 10 year yield differentials have strengthened over the past week, standing out as a key macro driver in recent dealings. The table below presents levels of correlations between NZD and key macro drivers (note the yield differential reflects swap rates).
- Recent strength in NZD, up ~1% last week, looks to be associated with the recent strength in global equities and 10-year yield differentials.
- The pair looked through weakness in agriculture and global commodity prices last week.
- Over the longer time frame, momentum in rate differentials and global commodities, agriculture and milk futures are the dominant macro drivers.
Fig 1: NZD/USD Correlation with Global Macro Drivers:
Source: MNI/Bloomberg
US TSYS: Holding In Narrow Range
Tsys have held in narrow ranges in recent dealing with little follow through on moves. No meaningful macro news flow has crossed in recent dealing. This leaves cash tsys little changed across the major benchmarks.
- TYU3 deals at 113-13, +0-00+, a touch off the top of the 0-06+ range observed today. The contract had gapped lower at the open, despite the absence of a headline driver, before ticking higher through the session.
CNH: CNY Fixing: Still Close To Neutral
The USD/CNY fix printed at 7.1212, versus a Bloomberg consensus of 7.1219.
- Today's fix represents a -7pip deviation in USD/CNY terms. We remain close to neutral on this metric. Note the rolling 5-day sum of the fixing error term is -22pips.
- USD/CNH has been supported in the first part of trading, albeit well within recent ranges. We currently track at 7.1440/50, slightly down from session highs of 7.1482.
