AUDNZD: NAB: Relative Growth Dynamics Supportive
Jan-24 02:19
NAB note that “growth relativities are important for currencies and when it comes to the AUD/NZD, we think the cross is likely to be well supported over 2023 amid an Australian growth outlook that is likely to show resilience vs. a New Zealand economy that is arguably heading towards (or already in) a recession.”
- “Relative inflation is another important factor. Cost pressures in New Zealand have forced the RBNZ to aggressively lift the OCR, but inflation has continued to surprise on the upside. The RBA has been less aggressive suggesting a bias for a relatively lower terminal rate.”
- “This week on Wednesday Australia and New Zealand will get Q4 CPI figures. The breakdowns of the headline readings are going to be important for RBNZ and RBA rate hike expectations. In both instances the market is looking for a much better CPI print vs. respective central bank projections. The cross is likely to face some volatility from relative rates expectations, however, we see relative growth outcomes favouring the cross.”
- “Our updated projections see the AUD/NZD cross trading around NZ$1.09/1.10 in H123 and as per our advice during Q422, we don’t expect periods sub-NZ$1.08 to prove long lasting.”
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US TSYS: Cash Treasuries Close Early With Further Sizeable Cheapening
Dec-23 19:10
- Cash Tsys hold onto further cheapening today at the early close, with yields 5-8.5bps higher on the day but just remaining off pre-U.Mich session highs across 2-10Y tenors.
- Those session highs were also month to date highs from 5Y tenors onwards, with the 2Y at highs since the Nov CPI miss on Dec 13 and the subsequent fall in terminal Fed pricing from close to 5% to ~4.9% currently.
- 2YY +5.0bps at 4.321%, 5YY +5.4bps at 3.857%, 10YY +6.9bps at 3.747% and 30YY +8.5bps at 3.823%.
- The first wave of US data were broadly as expected with core PCE inflation moderating and a small beat for income growth, before more mixed 1000ET data with new home sales surprisingly bouncing but importantly U.Mich inflation expectations being revised lower.
- Treasury futures are still set for a full session, with TYH3 currently trading 15 ticks lower at 113-02+ having earlier touched 112-31. In the process it cleared support at 113-09+ (Dec 21 low) to open the key short-term 112-11+ (Nov 21 low).
CANADA: GoC Yields Extend Session Highs
Dec-23 17:20
- Hard to see latest drivers but GoC yields across 2-10Y tenors, now up 12bps in the front-end to belly and 10bps for 10Y.
- Can-US yield differentials continue to narrow: 2Y at -39bps, 10Y -56bps, both close to highs since the BoC’s surprise Oct downshift.
- Move coincides with USDCAD stepping to new session lows to lows since Dec 15 at 1.3563. Support seen 1.3519 (Dec 14 low).
US TSYS: Re-Cheapening Ahead Of Early Cash Close
Dec-23 17:05
- Treasuries are seeing a re-cheapening of late, with yields back to 5-7bps higher on the day but remaining off pre U.Mich session highs.
- Those session (yield) highs were also month to date highs from 5Y tenors onwards, with the 2Y at highs since the Nov CPI miss on Dec 13 and the subsequent fall in terminal Fed pricing from close to 5% to ~4.9% currently.
- Only modest steepening on the day with 2s10s +1bp at -57.5bp, within the week’s range of -52 to -70bps.
- SIFMA recommends cash close at 1400ET.
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