GOLD: Slightly Weaker After Yesterday’s Solid Rebound

NZGBs closed on a strong note, with benchmarks flat to 1bp richer after being 2bps cheaper early. 

• The NZGB 10-year outperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials respectively 1bp and 3bps tighter. Nevertheless, at +21bps, the NZ-US 10-year differential  hovers just below the widest level for the year and back at November 2024 levels.
• Cash US tsys are ~2bps cheaper in today's Asia-Pac session after yesterday's modest gains.
• Swap rates closed flat to 1bp lower.
• RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with February 2026 leading the move. 24bps of easing is priced for April, with a cumulative 67ps by November 2025.
• The local calendar was empty today and will remain so until Friday's ANZ Consumer Confidence and Filled Jobs data release.
• Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.
• The NZ Treasury also plans to offer NZ$2bn of bonds in April, NZ$500mn each week. By April 30, a syndicated tap of the existing May 2032 nominal bond will be undertaken.

Australia ran a budget surplus of 0.6% of GDP in FY24 due to favourable commodity prices, but in FY25 the budget is likely to shift into a 1% deficit and then widen to 1.5% in FY26 before narrowing to 1.2% in FY27. There isn’t another surplus across the forecast horizon. Policy measures since December’s MYEFO have made a net $34.9bn contribution of to the aggregate deficit to FY29. 

• Westpac notes that “the government is projecting the structural budget deficit –the position excluding temporary factors – to hover at around 1.0% of GDP until mid–2029 before improving to be balanced by the end of 2035–36.”
• “Risks to the budget projections are two–sided. Windfalls from commodity prices will fade but may be slower to decline, Treasury typically makes cautious assumptions on the outlook. We expect the price of iron ore to end–2026–27 at US$85/t, above the budget estimate of US$60/t by mid–2026.”
• “Conversely, rising trade tensions and heightened policy uncertainty may precipitate an earlier decline in commodity prices and weakness across other revenue channels. More unsettled financial markets could also test the Treasury’s technical assumption for 10–year yields of 4.4%.”
• “At 27% of GDP, expenditures are set to be well above the 10yr average of 26%, with the ratio remaining above average throughout the forecast period.”
• New policies included “an extension of the electricity rebate and a modest tax cut to the bottom tax rate …, increased funding of Medicare to encourage bulk–billing, lowering the cost and expanding the scope of the PBS, and a freeze on excise for draught”. “Of these new policy measures, $8.3bn were previously provisioned for.”
• “Significant policy announcements since MYEFO have been ‘off budget’, such as the Federal government’s portion of the Whyalla Steelworks bailout. These are not counted in the underlying cash balance but are included in the headline fiscal balance and still add to gross debt. Treasury projections have off–budget items continuing to rise from record levels before gradually unwinding but remaining elevated in outer years.” The write down of student debt is also off balance sheet.

At the Tokyo lunch break, JGB futures are slightly weaker, -7 compared to settlement levels, after giving an overnight uptick.

• The Feb Japan PPI services rose 3.0%y/y, against a 3.1% market forecast and 3.2% prior print from Jan (which was initially reported as a 3.1% rise). In m/m terms the services PPI was flat, while BBG notes the 3-month annualized paced slowed to 1.0% in Feb. This metric was at 4.8% in Dec last year.
• (MNI) BoJ Ueda said on Wednesday that the real short-term interest rate is below -2.0%, slightly lower than the latest BOJ estimate, and the bank will raise the policy rate to adjust the degree of accommodative financial conditions. Ueda told lawmakers that the BOJ is always paying attention to the risk that the pace of underlying CPI inflation will accelerate above forecasts, noting the Bank had weakened the degree of easy policy since March 2024 when it scrapped the negative interest rate policy.
• Cash US tsys are ~2bps cheaper in today's Asia-Pac session after yesterday's modest gains. Wednesday's focus is on Durables/Cap Goods, Tsy 5Y Sale and Fed Speak from MN Fed Kashkari Fed and StL Fed Musalem.
• Cash JGBs are little changed across benchmarks. The benchmark 10-year yield is 0.4bps higher at 1.588%, a fresh cycle high.
• Swap rates are little changed.