AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce

In local morning trade, NZGBs are 6-7bps cheaper after US tsys finished near session cheaps after a rocky midweek session initially tied to US data then followed by trade-related headlines.

• A lower-than-expected February ADP job gain saw the market rally, which reversed after higher-than-expected ISM Services data.
• Risk-on gained after headlines reported Pres Trump and PM Trudeau were discussing tariffs & US weighing pause on Canada-Mexico auto tariffs.
• After today's US weekly claims trade balance and regional Fed data, focus turns to Friday's headline employment data for February.
• NZ Government's 7-month Financial Statements showed an OBEGALx deficit of NZ$3.67bn, NZ$1.37b narrower than the NZ$5b gap projected in the December fiscal update—net core Crown debt 44.8% of GDP vs 44% projection.
• NZ Construction Work fell 4.4% q/q (estimate -1.4%) in Q4 versus revised -3.0% in Q3.
• NZ House Prices rose 0.3% m/m in February after January’s flat outcome. Prices have been little changed since August, after a 4.1% drop in the preceding six months.
• Swap rates are 5-6bps higher.
• Today, 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.

• The NZD/USD saw some initial weakness on Wednesday due to the unexpected resignation of the RBNZ Governor with saw it drop by about 0.35% to 0.5640 as markets reacted to the uncertainty, however the pair quickly found support as the USD saw broad selling, with the NZD/USD closing up 1.15% at 0.5731, while the BBDXY dropped 1%.
• Strong buying interest pushed the pair above its 20 & 50-day EMA, signaling a potential shift in momentum, while the RSI entered positive territory and the MACD ticking back up, indicating a more constructive technical outlook.
• The NZD was also supported by strong Caixin Services PMI out of China, which came in at 51.4 vs 50.7 expected, and up from 51.0 in Jan.
• New Zealand’s 4Q construction work dropped 4.4% q/q, exceeding the expected -1.4% decline, following a revised -3.0% drop in 3Q. Residential construction fell 4.9%, while non-residential declined 3.1%. Estimates from economists had ranged from -2.0% to -0.4%.
• New Zealand’s Treasury reported an OBEGALx deficit of NZ$3.67b for the seven months to Jan 31, NZ$1.37b narrower than the NZ$5b forecast. Core Crown tax revenue exceeded projections by NZ$610m, with sales tax ~NZ$300m above forecast due to stronger consumption and residential investment. Core Crown expenses were NZ$592m lower than expected. The broader OBEGAL deficit, including ACC, stood at NZ$4.99b, NZ$1.24b narrower than projected. Net core Crown debt reached 44.8% of GDP, above the 44% projection.
• Expiries: 0.6150 (NZD330m) Upcoming notable strikes: 0.5795 (NZD1.14b March 7), 0.5645 (NZD651.6m March 11), 0.5840 (NZD328.6m March 10) 
• RBNZ dated-OIS is fully pricing in a 25bps cut in April, while there is about a 75% chance of a further 25bps cut priced for May, down from a 85% chance earlier in the week, with a cumulative 72bps of cut priced by November
• The NZ-US 2yr swaps was steady on Wednesday, however is still roughly 37bps higher than the lows made early this year.
• There is nothing of note on the local calendar for the next week

The US announced a one month delay on US tariffs on autos. Negotiations with Canada are also ongoing. The US dollar trended lower through the day and then took another step down on disappointing US ADP employment data (USD index fell 1.0%). This left AUDUSD up 1.0% to 0.6338 after a peak of 0.6342, the highest in a week. 

• Despite Wednesday’s rally, AUDUSD didn’t break above initial resistance at 0.6354, February 26 high. Key short-term resistance is at 0.6409 and clearance of this would strengthen a bull cycle. Initial support is at 0.6187, 4 March low.
• European currencies outperformed with the euro supported by news that Germany plans to increase defence and infrastructure spending. As a result, AUDEUR continued to trend lower and fell 0.5% to 0.5874 after a low of 0.5850, the weakest since August. The pair is down 1.9% this week. AUDGBP rose 0.2% to 0.4914 following a high of 0.4917.
• AUDJPY increased 0.5% to 94.38 and AUDNZD fell 0.1% to 1.1061 off the intraday low of 1.1047.
• Equities rallied with the S&P up 1.1% and Euro stoxx +1.9% but the FTSE was down slightly. Oil prices were lower again with Brent falling 2.4% to $69.37/bbl. Copper soared 5.6% on tariff news and iron ore is around $100-101/t.
• Today January building approvals print and are forecast to be flat on the month. The January trade surplus is expected to widen to $5.9bn from $5.085bn.