GLOBAL POLITICAL RISK: Vance States We Are Negotiating With Iran

NZGBs are 4bps cheaper after US tsys finished Friday’s session marginally mixed, with a steepening bias. 

• US GDP annualized q/q was lower than expected as are durable goods orders, other metrics were largely in-line. Markets reacting positively to latest headline re: France & Italy talking to Iran re: safe passage through Hormuz Straight, this after India tanker made safe passage earlier.
• UofM sentiment better than expected while 1Y inflation expectations holds steady to prior (lower than estimate), 5-10Y inflation exp dips slightly. JOLTS job openings surge higher, quits level declines but slightly higher than expected. Layoffs retreated.
• Look ahead to Monday's Data Calendar: Empire Mfg, IP/Cap-U, NAHD Housing Mkt Index.
• NZ’s Performance of Services Index dropped to 48 in February from a revised 50.7 in January. Result “suggests economy is recovering at a slower pace than we might have expected”: Doug Steel, senior economist BNZ – via BBG
• NZ retail card spending rose 1.4% m/m in February.
• Swap rates are 4bps higher, with 2-year at highest level since May last year.
• RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for April, while December 2026 assigns 59bps.

Bloomberg Finance LP

The USD/JPY range Friday night was 159.01-159.75, Asia is currently trading around 159.55. The pair continues to find solid demand on any dips and is now looking to challenge the all important 160-162 area. The jaw-boning by officials is probably set to intensify but personally with the USD so bid and risk struggling I think the BOJ/MOF are in a tough place, who wants to sell USD’s into a market that is looking for them. For now, I suspect they hold off until this market has calmed down and the demand for USD’s has turned lower again. Where does this leave USD/JPY and how high can it go before they are forced to come back in ? This is a tough question because you cannot discount them coming in back above 162 but for my mind I suspect it could be a lot higher than most expect given the current back drop, but it does increase the chances of them moving on rates. The market does not expect anything from the BOJ this week but MNI’s Hiroshi Inoue’s article last week raises the possibility of a rate hike. On the day, the first support is back toward 158.50-159.00 and then the 157.50 area. 

• “Trump said he hoped China, France, Japan, South Korea and the UK would send warships to escort vessels through Hormuz. Japan said any decision to send military vessels would face “high hurdles.” - BBG
• Bloomberg - “It’s the Length of Iran War That Matters for Bonds. As the war in the Persian Gulf continues though, the risk is the high price of oil spills over into other asset classes and, worse, into inflation expectations. So the longer this goes on, the more inflationary it is and the more ripple effects for financial markets.”
• CFTC Data up to 03/03/2026 shows Asset Managers again continuing to reduce their JPY longs to almost flat now, +4209(Last +20286). The Leveraged community is again rebuilding their short position, –54396(Last -42672).
• Options : Close significant option expiries for NY cut, based on DTCC data: 157.00($519m), 160.00($845m). Upcoming Close Strikes : 159.50($977m March 18 ) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 85 Points

Fig 1 : JPY CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P

Source: Bloomberg FInance LP / MNI