AUSSIE BONDS: ACGB Jun-35 Auction Shows A Solid Bid
Today’s auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.17bps below prevailing mid-yields, according to Yieldbroker. Additionally, the cover ratio was a robust 4.0167x, albeit slightly lower than the previous auction’s 4.1437x.
- As noted in our preview, the current yield was approximately 15–20bps lower than at the previous auction and 30–35bps below the peak seen in November 2023.
- Today’s demand was likely supported by a steeper 3s/10s curve, which reached its highest level since late 2021.
- Even so, the auction had to contend with this week’s deterioration in sentiment toward longer-dated global bonds, driven by rising concerns over potential Chinese retaliation to U.S. tariffs on Chinese goods.
- Following the auction, both the cash line and XM remained relatively unchanged.
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CNH: USD/CNY Fixing Dips But Remains Within Recent Ranges
The USD/CNY fix printed at 7.1696, versus a Bloomberg market consensus of 7.2269.
- The USD/CNY fixing error narrowed to -573pips, versus -898pips yesterday.
- The actual fixing remained within recent ranges. back on March 6th we had a 7.1692 outcome. At face value today's result is unlikely to encourage fresh yuan gains, at least based off this metric.
- USD/CNH is a touch firmer so far today, the pair back above 7.2300, off a little under 0.1% in CNH terms. Recent lows in the pair rest 7.2252.
CHINA SETS YUAN CENTRAL PARITY AT 7.1696 WEDS VS 7.1741
- CHINA SETS YUAN CENTRAL PARITY AT 7.1696 WEDS VS 7.1741
NEW ZEALAND: VIEW: Westpac Expects Consumption To Rise As Mortgages Roll Over
February card transaction data showed a moderate rise of 0.3% m/m in retail spending and that the recovery in consumption remains gradual and predominantly driven by grocery price increases. Westpac expects it to “strengthen over the coming months” though as mortgages are refinanced at lower rates following 175bp of RBNZ easing. It says that “around half of all mortgages will reprice over the next six months”. But global uncertainty could weigh on consumer confidence.
- Westpac observes that “the recovery in spending has been gradual. Despite increases in recent months, spending is only back around the levels we saw at this time last year”.
- “Spending in discretionary areas, like household durables and hospitality, has picked up, but gains have been more modest at this stage.”
- “Many borrowers have chosen to roll onto relatively higher cost floating rate or shorter-term mortgages in anticipation of further mortgage rate cuts.”
- Such a large share of mortgages rolling over in the next 6 months “could see sizeable falls in households’ debt servicing costs and boost their disposable incomes. As those lower borrowing costs ripple through the economy, we expect to see spending picking up over the coming months.”
- “However, we’re now watching event offshore. The increasingly rocky global backdrop could dent confidence. It could also affect financial conditions in New Zealand, and that could be important for spending appetites.”
