SINGAPORE: SG GDP: Outlook Improving on Trade Truce

NZ recorded its third merchandise trade surplus in four months in March at $970mn up from $392mn. The YTD deficit narrowed to $6.13bn from $6.63bn. It has now declined around $11bn since the May 2023 peak. Both export and import growth were robust last month. Trade is a bright spot in NZ’s struggling economy but with a 10% tariff on goods to the US and an escalating US-China trade war the outlook is highly uncertain and likely to be negative.

NZ merchandise trade balance $bn YTD

Source: MNI - Market News/LSEG

• Goods exports rose 0.6% m/m sa and 18.9% y/y with shipments strong to the two largest destinations China (+22.7% y/y) and the US (+21.8% y/y) while they were weak to Australia after a run of solid months (-0.5% y/y).
• Exports to the US have been trending higher since before Covid but they reached a new record level in March, as producers likely wanted to beat the imposition of US tariffs.
• Shipments of milk products, meat and machinery & equipment have driven the strength over the year. There was strong growth in milk products & fruit to China, while to the US it was meat.
• Imports fell 1.9% m/m sa in March but annual growth has been robust rising to 12.4%. The annual strength has been concentrated in consumer goods (+14.7% y/y) and non-transport capex (+8.3% y/y), while transport has been weak down 3% y/y, but does tend to be volatile.
• Q1 merchandise export values rose 11% q/q, while imports were up 4.1% q/q. 

NZ goods exports y/y% 3-mth ma

TYM5 is trading 110.24+, down 0-01 from its close. 

• Risk turned lower on Monday with concerns that President Trump will fire Fed Chairman Jerome Powell, adding to a market that is already consumed with uncertainty.
• “The US treasury has $60 Billion of extraordinary measures left, in addition to its cash pile, to help keep paying the government's bills.”(per BBG)
• Global GDP may take a $2 Trillion hit by the end of 2027 from Trump’s tariffs, per Bloomberg Economics estimates.
• Russia - Ukraine: Trump said there’s a good chance of a deal being reached this week. A US delegation led by Marco Rubio, Steve Witkoff and Keith Kellogg are slated to meet Ukrainian and European officials in London on Wednesday.
• China has warned countries against striking deals with the US that could hurt Beijing’s interests, putting countries in a position where they will eventually have to pick a side.
• The US 10-year yield has opened in Asia around 4.40%, after closing at 4.4106%.
• Data: The IMF releases its World Economic Outlook

ACGBs (YM +6.0 & XM -3.0) have twist-steepened after US tsys finished mixed on Monday. The US 2-year yield was down 4bps to 3.76%. The long end was underwater, with the 30-year rate rising 10bps to 4.90% amid inflation angst and fiscal worries. The US 10-year yield ranged between 4.3287% - 4.4185%, closing near the high around 4.41%, 8 bps higher.

• US markets were impacted by ongoing uncertainty over tariffs and rising concerns over Fed independence. President Trump's further verbal attacks on Fed Chair Powell appeared to heighten concerns over the soundness of US assets and unnerved investors.
• Cash ACGBs are 7 bps lower to 1 bp higher with the AU-US 10-year yield differential at -12 bps.
• Swap rates are 6bps lower to 1bp higher, with the 3s10s curve steeper.
• The bills strip has bear-flattened, with pricing +2 to +6.
• RBA-dated OIS pricing is 1-8 bps softer across meetings today. A 50bp rate cut in May is given a 25% probability, with a cumulative 122bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will be empty.  
• This week, the AOFM plans to sell A$1000mn of the 3.25% 21 April 2029 bond on Wednesday.