NZD: NZD/JPY Testing Through 100-day EMA Resistance
NZD/USD is outperforming in the G10 space, up around 0.25% in latest dealings. We track close to 0.5...
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AUSSIE BONDS: AU-NZ 10Y Yield Differential Too High
The AU-NZ 10-year yield differential is 5bps lower today, standing at -12bps compared to the recent high of +10bps in early November, which marked the highest level since August 2022.
- The recent decline in the 10-year yield differential between Australia and New Zealand has mirrored a similar move in the AU-NZ 1-year forward 3-month swap rate (1Y3M) spread.
- However, a simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past 18 months shows that the 10-year differential is around 12bps above fair value based on the regression model (-11bps compared to a fair value of -23bps).
- The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
Figure 1: AU-NZ: 10-Year Yield Differential Vs. FV
Source: MNI – Market News / Bloomberg
FOREX: CFTC Positioning Update; Further Moves Against USD, Led By EUR
In terms of the CFTC positioning update from Friday, leveraged contracts saw a sharp shift against the USD. This data is for the week ending Feb 18. The table below outlines positioning shifts by currency and investor type and what the outstanding position is now for each currency.
- Except for NZD, leveraged players sold the USD against all the currencies covered by CFTC. Notably shifts were for AUD, EUR and JPY. Still, in an outright sense we have net shorts across all currencies except for GBP for this investor class.
- This suggests more short covering/exiting long USD positions could take place, although such flows may have already transpired to some degree, as current USD index levels sub those seen on Feb 18.
- For asset managers, the bias was also skewed against the USD, although this was mainly reflected in terms of positive flows into EUR and GBP.
- EUR/USD was the stand out last week from a flow standpoint.
Fig 1: CFTC Positioning Update By Currency & Investor Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | 7169 | -23850 | 1610 | 38924 |
| EUR | 9600 | -11227 | 12288 | 172533 |
| GBP | 3182 | 34804 | 11589 | -56476 |
| AUD | 9148 | -33347 | -2017 | -31084 |
| NZD | -2484 | -13860 | -484 | -43799 |
| CAD | 3553 | -78094 | 3422 | -135461 |
| CHF | 798 | -14160 | -1633 | -39052 |
| MXN | 4023 | -8286 | -2082 | 10885 |
Source: CFTC/MNI - Market News/Bloomberg
AUSSIE BONDS: Holding Richer On A Data-Light Session
ACGBs (YM +6.0 & XM +7.0) are stronger on a data-light session.
- There is no cash US tsy trading in the Asia-Pac session today with Japan closed for the Emperor’s Birthday holiday. TYH5 is dealing -0-05+ compared to closing levels at 109-17.
- Cash ACGBs are 6-7bps richer.
- Swap rates are 6-7bps lower.
- The bills strip has bull-flattened, with pricing flat to +7.
- RBA-dated OIS pricing is flat to 6bps softer across 2025 meetings today but remains 1-3bps firmer than last Tuesday’s pre-RBA levels. A cumulative 48bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- The AOFM sold A$300mn of the Jun-34 green bond, with a cover ratio of 5.38x.
- QTC launches a tap of the 5% Jul-37 bond. Orders will be accepted via the JLM's on either an outright or EFP basis only.
