US TSYS: Futures Extend Re-Open Stronger After Yesterday’s Strong Rally
Apr-03 22:12
TYM5 is 112-24+, +0-04 from closing levels in today's Asia-Pac session.
- Heavy risk-off support in rates saw June 10Y futures climb to 113-02 midmorning Thursday. The move was just shy of technical resistance of 113-05 (1.764 proj of the Jan 13 - Feb 7 - Feb 12 price swing), according to MNI’s technicals team.
- Cash US tsys finished broadly richer, with yields 3-18bps lower, as equity markets reacted negatively to Pres Trump's reciprocal tariff announcement late Wednesday. SPX e-minis index fell over 4.25%, the tech-heavy Nasdaq over 5.5% and the DJIA over 3.4% lower.
- March's ISM Services report showed well below-expected activity measures and a softer-than-expected reading on prices. This wasn't an outright negative report, with an expansionary overall reading and mixed comments about the impact of government policy shifts, including tariffs, but it certainly casts a more cautious light on the services sector than February's solid ISM data.
- Projected rate cuts in 2025 rose to three 25bp moves by late October. Nevertheless, Fed Governor Jefferson (permanent voter) says there is no need to hurry to make rate adjustments, repeating a stance from Feb 19 when he last spoke on monetary policy. "The current policy stance is well positioned to deal with the risks and uncertainties we face in pursuing both sides of our dual mandate."
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BONDS: NZGBS: Cheaper As US Yields Rebound Off Lows After Equity Reversal
Mar-04 22:03
In local morning trade, NZGBs are sharply cheaper after US tsys finished with a bear-steepener, yields 4-9bps higher.
- This came after US tsys reversed off Tuesday morning's yield lows as stocks rebounded off lows. Nasdaq firmly in the green before making a late retreat ahead of the close. Another factor was a retreat in Bunds amid reports officials were proposing an E500B "whatever it takes" defence fund.
- No substantive US data Tuesday, "I do factor in some effect of tariffs on inflation on prices. I do think we're going to see that later this year," Williams told a Q&A at a Bloomberg Invest event.
- Focus now turns to President Trump addressing the joint session of Congress tonight at 2100ET. Followed by ADP private employment data tomorrow morning at 0815ET.
- Late session chatter that President Trump wants to announce a minerals deal with Ukraine after all.
- Swap rates are 7-9bps higher, with the 2s10s curve steeper.
- Today, the local calendar will see ANZ Commodity Price data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.
JPY: USD/JPY Touches 148.10 Before Rebounding Strongly, BoJ Dep Gov Speaks Today
Mar-04 21:59
Yen lagged broader USD shifts through Tuesday. USD/JPY tracks near 149.75/80 in early Wednesday dealings, losing a little bit of ground versus the USD for Tuesday's session. All the other majors have rallied against the USD, led by the EUR (up over 1.25%). Broader stagflationary concerns for the US economy weighed on dollar sentiment.
- USD/JPY broke below 148.60 support during Tuesday trade, a level that had been building in significance. Spot traded as low as 148.10 but bounced back ahead of the APAC crossover, tracking back towards 150.00 in latest dealings.
- Sentiment has been impacted by late US Tuesday comments from US Commerce Secretary Lutnick, who hinted tariff relief/compromise with Canada and Mexico could be announced Wednesday in the US during a Fox News interview. This has aided CAD and MXN sentiment and broader risk appetite. US yields also spiked late in US trade, the 10yr yield back to 4.25%, after touching 4.10% earlier in Tuesday trade.
- This moves have seen the traditional yen safe underperform through the latter stages of Tuesday US trade and early Wednesday Asia Pac trade. On the upside for USD/JPY, key short-term resistance has been defined at 151.30, the Mar 3 high. Clearance of this level is required to signal a base.
- Locally today we have the final Feb reads for the Jibun bank PMIs (services and composite). We also have a speech from Deputy Governor Uchida.
- In the option expiry space note the following for NY cut later: Y147.90-00($702mln), Y148.50($505mln), Y149.00($720mln), Y151.00-10($1.0bln), Y151.85-00($1.0bln).
NZD: NZD/USD Rises on Broad USD Weakness
Mar-04 21:55
- NZD/USD jumped +0.77% to 0.5660 on Tuesday, tariff considerations have been a primary driver of FX sentiment, with the USD weaker across most G10 currencies, the BBDXY is -0.60%, with the ongoing stagflationary concerns regarding the US economy also weighing on the USD.
- We tested key support on Monday at 0.5600, briefly trading below it below ticking higher a clear break here would then open up a move to retest the Feb 3 lows of 0.5516. To the upside, key resistance sits around 0.5674/.5695 (20-, 50-Day EMA).
- GDT prices declined, with the average price for whole milk powder falling to $4,061 from $4,153. The weighted average price for all milk products dropped to $4,209 per ton. The GDT price index fell 0.5%, reflecting a broad decline across dairy products.
- Expiries 0.6350 (NZD352.8m). Upcoming notable strikes: 0.5795 (NZD1.14b March 7), 0.6150 (NZD330m March 6), 0.5840 (NZD328.6m March 10)
- RBNZ dated-OIS is fully pricing in a 25bps cut in April, while there is about a 82% chance of a further 25bps cut priced for May up from about 70% last week, with a cumulative 80bps of cut priced by November, up from 64bps.
- The NZ-US 2yr swaps continues to rise, trading 3bps higher on Tuesday to -47.5bps, that is a 37.5bps move since the start of Feb
- Today we have ANZ Commodity Price & Corelogic home Values prices
