US TSYS: Yields Edge Lower As Trade-Deal Optimism Sustains Risk-On Mood
Apr-25 04:41
TYM5 is trading at 111-07, unchanged from closing levels in today's Asia-Pac session.
- According to MNI's technicals team, the next resistance to watch for TYM5 is at 111-25, 50.0% of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme.
- Cash US tsys are dealing ~1bp richer in today's Asia session after reversing the slight cheapening earlier. Yesterday, US tsys saw a solid session, led by the belly. The 5-year yield is 0.9bp lower today at 3.925%, after dropping by 9bps yesterday.
- US tsys found support on Thursday from comments by Cleveland Fed's Hammack, who noted the Fed could act as soon as June if incoming data proves "convincing." Meanwhile, Fed Governor Waller expressed concern over the potential drag of tariffs on economic growth, suggesting their inflationary impact would likely be transitory.
- Yesterday’s risk-on sentiment sparked by trade "negotiations" headlines with India and South Korea has extended into today’s Asia session. US equity futures are ~0.5% higher.
- “Any u-turn on tariffs by the Trump administration would help market sentiment, Kelvin Tay, regional CIO for UBS Global Wealth Management, says in an interview on Bloomberg TV.” (per BBG)
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AUSSIE BONDS: Cheaper Despite CPI Beat
Mar-26 04:34
ACGBs (YM -4.0 & XM -4.0) are weaker and sit in the middle of today’s of today’s ranges.
- February headline CPI rose 0.1% m/m to be up 2.4% y/y down from January’s 2.5%.
- Given it continues to be impacted by various state and federal electricity rebates, the focus is on the underlying trimmed mean which moderated 0.1pp to 2.7% y/y and has been under 3% now for three straight months.
- Q1 data is released on April 30 and the RBA is forecasting core at 2.7%, in line with the monthly data and below the target band’s ceiling, which will be the first time since Q4 2021. The outcome will be a key input into the May 20 RBA decision.
- Cash US tsys are ~2bps cheaper in today's Asia-Pac session after yesterday's modest gains
- Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +13bps.
- Swap rates are 3bps higher.
- The bills strip contracts are -2 to -5, with a steepening bias.
- RBA-dated OIS pricing is flat to 5bps firmer across meetings today. A 25bp rate cut in April is given a 4% probability, with a cumulative 64bps of easing priced by year-end.
- The local calendar will be empty for the remainder of the week.
GOLD: Early Gains Given Back as Gold Retreats.
Mar-26 04:30
- Following the first three successive down days of the year, gold resumed its rally overnight gaining +0.30% yet couldn’t hold onto those gains in the Asian trading session .
- Whilst a short-term spike towards the middle of the Asian trading day saw gold touch US$3,027.12.00, gold fell below it’s opening level of $3,020.08 to $3,016.10
- Overnight weaker than expected US consumer confidence was a contributor to risk sentiment, which carried over into the Asian trading session. .
- The bid by South African miner Gold Fields for Australian miner Gold Road Resources has been rejected.
- All key moving averages remain upward sloping, indicating that the bullish momentum remains in place for gold as it remains above the 20-day EMA of $2,974.50
OIL: US Stock Drawdown Supports Crude In Uncertain World, EIA Data Out Later
Mar-26 04:10
Oil prices are moderately higher following data showing a large crude stock drawdown in the US last week. Markets tentatively sold off on news of a partial Ukraine-Russia ceasefire deal but the trend hasn’t continued today as Russia has conditions and US President Trump said that the Russians may be “dragging their feet” on settling an agreement. Positive risk sentiment has also supported crude today.
- WTI is up 0.3% to $69.18 after a high of $69.45 earlier. The benchmark is struggling to hold breaks above the 50-day EMA at $69.33. Brent is off its intraday peak of $73.37, but is hovering around initial resistance at $73.17 to be 0.2% higher at $73.18. The USD index is 0.1% higher.
- Oil price moves have been muted and the market is likely waiting for what US tariffs are actually imposed on April 2. It has been concerned that increased trade protectionism will reduce global demand. Trump has said that he’s likely to be more lenient than reciprocal but doesn‘t want too many exceptions. Thus uncertainty remains heightened.
- Bloomberg reported that there was a US crude inventory drawdown of 4.6mn barrels last week, according to people familiar with the API data. Products continued to decline with gasoline down 3.3mn and distillate 1.3mn. The official EIA data is out today.
- Later the Fed’s Kashkari and Musalem appear and preliminary US February durable goods data print. The ECB’s Cipollone participates in a panel and UK February CPI and the government spring budget statement are released.
