AUSSIE BONDS: Weaker, Off Cheaps, Awaits WPI
ACGBs sit weaker (YM -3.0 & XM -2.0), off session cheaps, after the RBA Minutes signalled that the May decision to hike 25bp was a close call, with a no change outcome discussed. Members acknowledged the significant uncertainties surrounding the economic outlook, but on balance, they judged that a further increase in interest rates was warranted to bring inflation back to target.
- Richer US tsys in Asia-Pac trade also assisted the move off session lows.
- Cash ACGBs are 2bp richer after the Minutes release to be 2bp cheaper on the day with the AU-US 10-year yield differential +2bp at -4bp.
- Swap rates are 1-2bp higher on the day with the 3s10s curve flatter.
- Bills are 2bp stronger after the Minutes with pricing flat to -3.
- RBA-dated-OIS are slightly softer after the Minutes, sitting 1bp softer to 2bp firmer across meetings.
- Tomorrow sees the release of the Wage Price Index for Q1. After last quarter’s surprisingly soft print despite the minimum wage lift, the market will be watching to see if that result is reversed in Q1.
- Until then, all eyes will be on global bonds as they navigate Q1 GDP in the Euro Area and April Retail Sales in the US.
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US: President Biden To Deliver Remarks At Rally In Ireland
US President Joe Biden is shortly due to address a crowd at a campaign-style rally in County Mayo, Ireland to conclude his three-day tour of Ireland.
- Livestream: https://www.whitehouse.gov/live/
- Reuters reports: “The tour, a celebration of his close links to his ancestral homeland and deep Catholic faith, has provided a preview of his planned 2024 re-election campaign, with enthusiastic flag-waving crowds, photo-ops with babies and long, loquacious speeches.”
AUDUSD TECHS: Fades Into Friday Close
- RES 4: 0.6921 High Feb 20
- RES 3: 0.6861 50.0% retracement of the Feb 2 - Mar 10 bear leg
- RES 2: 0.6824 High Feb 24
- RES 1: 0.6797 High Apr 13
- PRICE: 0.6712 @ 16:03 BST Apr 14
- SUP 1: 0.6685/6620 Low Apr 14 / 10
- SUP 2: 0.6590 Low Mar 15
- SUP 3: 0.6565/47 Low Mar 10 / 61.8% of the Oct - Feb bull cycle
- SUP 4: 0.6500 Round number support
AUDUSD topped the 50-day EMA convincingly on Thursday amid broad USD weakness. This works against the broader downtrend, leaving a break below 0.6565 - the Mar 3 low - a requirement for any resumption and continuation of the bear cycle. A continuation higher would open 0.6824, the Feb 24 high and 0.6861, a Fibonacci retracement. First support to watch is Thursday’s low at 0.6685. A breach would be seen as an early reversal signal.
US STOCKS: Real Yields Outweigh Initial Bank Optimism
- The S&P E-mini has pulled back off lows of 4138 but remains under pressure at 4149 at typing (-0.6%) as it unwinds half of yesterday’s push higher.
- It comes with the 10Y real yield pushing back towards session highs seen after retail sales, currently +5bps on the day with real yields behind most of the sell-off in nominal yields.
- Nasdaq trims earlier losses to see similar declines (-0.6%) whilst in banks, the KBW index (+0.7%) still sees striking contrast between large banks after positive earnings this morning and regionals currently -2.7%.
- North of the border, the TSX outperforms with 0.0%, with banks gaining +0.5%.
