AUSTRALIA DATA: Tight Labour Market & Wages Growth To Keep RBA Tone Cautious

In Tokyo morning trade, JGB futures weakened, -40 compared to settlement levels.

• Today, the local calendar will be empty apart from 20-year supply.
• Cash US tsys are 1-3bps richer, with a flattening bias, in today's Asia-Pac session after yesterday’s solid gains.
• After the market close, Bostic spoke: "Right now range of possible outcomes has multiplied. Inflation is still much higher than target. Not in a position to boldly move in any direction, need more clarity." (via RTRS/BBG)
• “The Bank of Japan will probably leave aside raising interest rates for now due to uncertainties stemming from US tariff measures that could deal a blow to Japan’s economy, according to a former executive director, Kenzo Yamamoto. The BoJ wants to see how US-Japan trade talks proceed before making a move, and the current environment is not suitable for promoting further yen appreciation with monetary policy.” (per BBG)
• Cash JGBs are flat to 3bps cheaper across benchmarks, with the futures-linked 7-year leading the sell-off. The benchmark 20-year yield is 0.5bp lower at 2.427% ahead of today’s supply.
• Swaps have twist-flattened, with rates 3bps higher to 8bps lower. Swap spreads are mixed.

• As equity markets whipsaw around globally and domestically, the one thing that is evident is the calmness of the Chinese bond market.
• Authorities have managed successfully an issuance deluge by the government in the early part of the year amongst significant global volatility
• The China 10YR government bond has moved in a 35bp range (low 1.60% - high 1.95%) since the start of the year.
• By comparison the US 10YR government bond has moved in a 80bps range (low 4.00% - high 4.80%).
• China’s bond futures are modestly higher today with the 10YR +0.06 at 109.05; remaining above all major moving averages.  The nearest being the 20-day EMA of 108.46.
• China’s 2YR bond future is flat lower by -0.01 today at 102.57, touching the 50-day EMA of 102.57.  Beneath that is the 20-day EMA of 102.53.
• China’s 10YR CGB is at 1.65%; -1bp lower today.
• Tomorrow sees the release of 1Q GDP where market expects an expansion of +5.2% 

The BBDXY range overnight was 1227.25 - 1235.95, Asia is dealing around 1232 currently, very similar levels to yesterday as the market tries to consolidate. 

• Earlier, US Tsy Secretary Bessent said there is no evidence of sovereign sales of US government debt and the USD is still a global reserve currency. He also said there will be first-mover advantage in trade talks.(per BBG TV)
• Still, focus will remain on the USD's and US Tsys potential erosion of safe haven status. Our US based policy team noted this in an interview overnight with a former Fed and US Tsy Department official, see this link for more details.
• EUR/USD will remain in focus, with traders targeting a move back to 1.2000 in the Euro as the USD’s safe haven role is reassessed. There are structural forces underpinning these gains: Firstly Germany loosening its fiscal rules will provide a buttressing in the euro-area should there be a global downturn and secondly tariffs will eventually reduce Europe's trade surplus with the US, meaning less revenue gets invested back into USD assets.(per BBG)
• Technically, the backdrop for the BBDXY index remains quite poor.  A move back below 1200 in the BBDXY would likely see the move lower gather momentum.
• After such a quick move lower though it is normal to have some positions pared back as we head towards a long weekend. Expect sellers to reengage on bounces back towards the 1250/60 area.
• Data: Upcoming US data: Empire Man 15/04, Retail Sales 16/04

Fig 1: Break down in EUR/USD and Yield Differentials 

Source: MNI - Market News/Bloomberg