AUSSIE BONDS: Subdued Session Ahead Of FOMC Announcement

NZGBs closed at session cheaps, showing a bear-steepener, with yields 5-8bps higher.  

• Producer output prices rose 2.1% q/q in Q1, the largest quarterly increase since mid-2022.
• “New Zealand will change its thin capitalisation rules to remove a roadblock to foreign investment”, Finance Minister Nicola Willis says.
• “New Zealand's monthly prices suggest inflation is gaining momentum, pointing to upside risks to the Reserve Bank of New Zealand's 2Q25 outlook.” (per BBG)
• Swap rates closed 4-6bps higher, with implied swap spreads tighter.
• Nevertheless, the market’s attention was focused abroad with cash US tsys twist-steepening in today's Asia-Pac session. US yields are 1bp lower to 5bps higher with the market continuing to digest late Friday news that Moody's Ratings downgraded the US credit score.
• RBNZ dated OIS pricing closed flat to 3bps firmer across meetings, late 2025 / early 2026 leading. 25bps of easing is priced for May, with a cumulative 63bps by November 2025.
• Tomorrow, the local calendar will be empty ahead of trade balance data on Wednesday and the Budget on Thursday.
• On Friday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$150mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.

The BBDXY has had a range of 1228.00 - 1230.27 in the Asia-Pac session, it is currently trading around 1230. “The ECB’s Christine Lagarde told La Tribune Dimanche the euro’s strength against the dollar is “counterintuitive, but justified” amid Trump’s erratic policies and presents an opportunity for Europe. She said she’s “not at all pessimistic” about the bloc’s economy.”(BBG)

• EUR/USD -  Asian range 1.1173 - 1.1199, Asia is currently trading 1.1185. EUR/USD has had a quiet session considering the backdrop. The market is still expected to use dips as a buying opportunity and dips back towards 1.09/1.10 should see buyers remerge.
• GBP/USD - Asian range 1.3267 - 1.3314, Asia is currently dealing around 1.3300. Decent demand for GBP sub 1.3200 has seen it bounce back to the middle of its recent range 1.3150 - 1.3450. Like the EUR the market prefers to buy on dips, building for the next leg higher.
• USD/CNH - Asian range 7.2042 - 7.2180, the USD/CNY fix printed 7.1916. Asia is currently dealing around 7.2160. Sellers should be found on a bounce back towards 7.24/25 again.
• Cross asset : SPX -1.01%, Gold $3215, US 10-Year 4.51%, BBDXY 1229, Crude oil $62.23

• Data/Events : ECB Muller & SNB Schlegel to speak, Spain Trade Balance, EZ CPI

  Fig 1: GBP/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

After rising over a percent on Friday, crude is moderately lower in APAC trading today following April data showing weaker retail sales and property sector in China. Brent is down 0.4% to $65.16 after falling to $64.69 early in the session, while WTI is -0.3% to $62.28 after a low of $61.77. The early sell off was driven by concern regarding the strength of US growth in the wake of Moodys’ downgrade. The USD index is down 0.2%. 

• The progress of negotiations on Iran’s nuclear programme, US trade deals and peace in Ukraine remain highly uncertain. Iranian President Pezeshkian has said it won’t give up its non-military nuclear programme. Estimates suggest that an easing of sanctions on Russia and Iran would only have a moderate impact on global oil supplies as both have been able to find ways around restrictions.
• US President Trump has said that he will speak by phone to Russian President Putin about an end to the war in Ukraine at 10:00 EDT (14:00 GMT) today. This will be followed by a call with Ukrainian President Zelensky and some NATO leaders.
• China’s April IP data showed a 1.5% y/y rise in crude production but 8.1% y/y in natural gas.
• Later the FOMC’s Bostic, Jefferson, Williams, Logan and Kashkari appear. The Atlanta Fed’s financial market conference takes place until May 21. The April US leading index and euro area April CPI are released.