AUSSIE BONDS: Slightly Mixed After A Muted Session Of Trading
ACGBs (YM -0.5 & XM +1.5) are slightly mixed on a data-light session. The local calendar was empty today and will remain so until next Wednesday's Q2 CPI data.
- Cash US tsys are little changed in today's Asia-Pac session after yesterday's modest bear-flattener. Friday's US data, including Durable Goods Orders and Capital Goods Orders Nondef Ex Air, followed by the Kansas City Fed Services Activity.
- (Bloomberg) - "Donald Trump said he didn't see the need to fire Jerome Powell, making it clear he saw lowering rates as a more pressing concern. The two publicly traded barbs over the Fed's cost overruns during their tour of the project."
- Cash ACGBs are flat to 1bp richer with the AU-US 10-year yield differential -5bps.
- The bills strip is slightly weaker, with pricing -1 to -2.
- RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in August is given a 94% probability, with a cumulative 57bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- Next week, the AOFM plans to sell A$1000mn of the 2.25% 21 May 2028 bond on Tuesday and A$1200mn of the 2.75% 21 June 2035 bond on Friday.
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BONDS: NZGBS: Closed On A Strong Note, Tracking US Tsys & ACGBs
NZGBs closed on a strong note, with benchmark yields 4-5bps lower. NZ-US and NZ-AU 10-year yield differentials were little changed.
- Cash US tsys are modestly mixed in today's Asia-Pac session after yesterday's modest gains. Yesterday, FOMC sitting member Schmid, Kansas Fed, affirmed Chair Powell's comments to the Senate that it is best to watch and wait to assess the impact of tariffs and policy on the economy, given its resilience, especially the labour market, rather than rushing to ease monetary policy. Today’s US calendar: MBA Mortgage Applications, Building Permits, New Home Sales.
- (Reuters) -New Zealand on Wednesday released a draft 30-year national infrastructure plan, which highlighted a need for the country to invest more in hospitals and electricity production and to prepare to spend more on responding to national disasters.
- Swap rates also closed 4-5bps lower, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed flat to 6bps softer across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
- Tomorrow, the local calendar will be empty apart from the NZ Treasury's planned sale of NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.
FOREX: Asia FX Wrap - BBDXY Finds Some Demand Towards 1200, For Now
The BBDXY has had a range of 1200.25 - 1202.09 in the Asia-Pac session, it is currently trading around 1202. The BBDXY has found some demand back towards the 1200 area in a very quiet Asian session, +0.04%%. The BBDXY extended its move lower again overnight, the price action was very revealing and points to a market that is very quick to reinstate USD shorts with conviction pretty high for a move lower. “The BOE’s Andrew Bailey and Dave Ramsden warned that the labor market is cooling and pay pressures are easing in one of the strongest signs yet that the central bank is on course to cut rates again this summer”(BBG).”Goldman said the dollar will extend its worst start to a year as foreign investors boost FX hedges.”(BBG)
- EUR/USD - Asian range 1.1605 - 1.1631, Asia is currently trading 1.1615. The EUR remains well supported on dips, potential USD demand today with corporate month-end. While the USD remains on the back foot the EUR will continue to be supported first support back towards 1.1500.
- GBP/USD - Asian range 1.3611 - 1.3629, Asia is currently dealing around 1.3615. The GBP again found solid demand around its 1.3400 support and has made new highs above 1.3600 looking for the momentum to carry it through its weekly pivot.
- USD/CNH - Asian range 7.1604 - 7.1711, the USD/CNY fix printed 7.1668. Asia is currently dealing around 7.1680. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.01%, Gold $3327, US 10-Year 4.297%, BBDXY 1202, Crude oil $65.20
- Data/Events : Spain GDP & PPI, France Consumer Confidence
Fig 1: GBP/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
NZD: Asia Wrap - NZD/USD Builds On Momentum Above 0.6000
The NZD/USD had a range of 0.6004 - 0.6040 in the Asia-Pac session, going into the London open trading around 0.6030, +040%. The NZD has drifted higher all through the Asian session, taking us back to the overnight highs. We are approaching the corporate month-end and this normally results in a demand for USD's this could provide some very short-term headwinds.
- NZ's trade surplus narrowed to NZ$1.235b in May from a revised +NZ$1.285b in April. 12 months ytd trade deficit narrowed to NZ$3.790b from a revised -NZ$4.965b in April.
- “Goldman said the dollar will extend its worst start to a year as foreign investors boost FX hedges.”(BBG)
- A huge bounce from sub 0.5900 and the NZD is now trying to establish a foothold above 0.6000, corporate month- end could provide some headwinds but for now dips look likely to be well supported.
- Technically while the support around 0.5850 holds in NZD/USD it is still in an uptrend. This area held perfectly and should risk continue to move higher then the focus will turn once again back to the 0.6050/0.6100 area.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6040(NZD373m June 26)
- AUD/NZD range for the session has been 1.0770 - 1.0809, currently trading 1.0780. The cross seems to have failed in its attempt to push higher above 1.0800, a sustained break back below sub 1.0750 would see the downtrend reengaged.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
