US TSYS: Futures Weaker After Latest Tariff headlines

ACGBs (YM flat & XM flat) are little changed. On Friday, US tsys rallied back to mid-December yield lows. Global trade, tariff uncertainty, and data that leaned towards softer inflation remained supportive.

• US Core PCE eased to 2.647% y/y from an upward revised 2.865% y/y (initial 2.794%) in Dec, as it starts to be helped by more favourable base effects.
• Cash ACGBs are unchanged with the AU-US 10-year yield differential at +9bps.
• S&P Global Manufacturing PMI for February printed at 50.4 from 50.2 in January.
• Australia’s home values rose 0.3% m/m in February, following two months of declines.
• Swap rates are little changed.
• The bills strip is flat to -1.
• RBA-dated OIS pricing is flat to slightly firmer across meetings today. A 25bp rate cut in April is given a 9% probability, with a cumulative 59bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will also see Melbourne Institute Inflation data alongside Q4 GDP partials, namely Company Operating Profit and Inventories.
• This week, the AOFM plans to sell A$800mn of the 4.25% 21 March 2036 bond on Wednesday and A$700mn of the 1.00% 21 December 2030 bond on Friday. 

In local morning trade, NZGBs are slightly cheaper despite US tsys rallying on Friday, finishing near mid-December yield lows. Global trade, tariff uncertainty, and data that leaned towards softer inflation remained supportive.

• US Core PCE eased to 2.647% Y/Y from an upward revised 2.865% Y/Y (initial 2.794%) in Dec, as it starts to be helped by more favourable base effects. The Atlanta Fed’s GDPNow for Q1 has been slashed to -1.5% from 2.3% annualised on Feb 19.
• Meanwhile, Chicago PMI, produced with MNI increased 6.0 points to 45.5 in February. This is the second consecutive monthly gain, taking the reading to the highest level since June 2024, though it remains in contractionary territory for the fifteenth consecutive month.
• USD gained ground after President Trump & Zelenskyy failed to reach an accord, chances of an imminent ceasefire looking less likely.
• NZ terms of trade rose 3.1% q/q (estimate +1.4%) in Q4.
• Swap rates are flat to 1bp higher.
• RBNZ dated OIS pricing is little changed. 26 bps of easing is priced for April, with a cumulative 67bps by November 2025.

Risk-sensitive Aussie was again one of the underperformers in the G10 with AUDUSD falling below 62c to a low of 0.6193 following the clash at the White House with President Zelensky which increases global uncertainty. The pair recovered slightly to 0.6209 to be down 0.4% on the day and 2.3% on the week as further US tariffs, especially on China, weighed on the AUD. It is currently higher at 0.6215. The USD rose on the developments and finished up 0.3%. 

• Last week’s AUD softness has undermined the recent bullish theme and opened up the possibility of a deeper retracement. AUDUSD is trading below the 20- and 50-day EMAs and opened support at 0.6171, 4 February low. The bear trigger is at 0.6088. Initial resistance is at 0.6313 50-day EMA.
• Kiwi was the worst performer on Friday leaving AUDNZD up 0.15% to 1.1090. It continues to trade towards 1.1100 and is currently around 1.1094.
• The yen also struggled at the end of last week with AUDJPY up 0.1% to 93.52 and the pair has started the week at 93.72.
• While all G10 currencies were lower against the greenback, Europe outperformed. AUDGBP fell 0.3% to 0.4935 after a low of 0.4924 and was down 1.9% last week. AUDEUR reached a low of 0.5962 before recovering to 0.5983 to be down 0.2%. It is currently around 0.5974.
• Equities were mixed with the S&P up 1.6% but the Euro stoxx down 0.2%. Oil prices were moderately lower with Brent -0.7% to $72.81/bbl. Copper fell 1.2% and iron ore is down to around $102.50/t.
• Today S&P Global final February manufacturing PMI, Q4 profits & inventories, February ANZ job ads and Melbourne Institute inflation gauge are released.