AUSTRALIA DATA: Tight Labour Market & Wages Growth To Keep RBA Tone Cautious
May-15 02:46
The April jobs data continue to show that Australia’s labour market remains tight with employment growth keeping up with the labour force over the last year and the unemployment rate remaining steady at 4.1%, only marginally higher than November’s recent low. However, there are some early signs that workers would like more hours. This week’s stronger-than-expected labour and wage data are unlikely to derail a May 20 rate cut but will probably keep the RBA cautious regarding future easing.
- Employment rose 89k in April, slightly below the 95k increase in the labour force which resulted in a 6k rise in the number of unemployed. Compared to last year jobs and the labour force both grew 2.7%, while working age population was up 2.1%. Unemployment is now 2.2% y/y higher, the slowest pace since November. The participation rate rose 0.3pp to 67.1%.
- Over the last 12 months 398.8k jobs were created averaging 32.5k/month compared to 335k and 27.9k over the previous year.
Employment vs labour force y/y%
Source: MNI - Market News/ABS
- Full-time (FT) employment recovered rising 59.5k in April, while part-time (PT) added 29.5k after 12.2k and 24.2k respectively. This saw the FT annual rate pickup to 2.6% from 1.6% while PT remained solid at 3.0% but down from March’s 3.4%.
Employment y/y%
Source: MNI - Market News/ABS
- The outperformance of the FT sector is also reflected in hours worked as they rose 0.1% m/m compared to PT falling 0.3% m/m leaving the total flat in April, despite strong jobs growth. 3-month momentum is weak though at -1.4% annualised after hours falling in both February and March and FT is down 2.2% while PT is up 2.4% but down significantly.
- Softening hours are reflected in April’s 0.15pp increase in the underemployment rate to 6.0%.
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JGBS: Cash Bonds Cheaper Ahead Of 20Y Supply
Apr-15 02:22
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.
CHINA: Bond Market Remains Calm in Storm.
Apr-15 02:16
- 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%
USD: Freefall Pauses For A Breath
Apr-15 02:13
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
