US-JAPAN: Trump States 'Big Progress' In US-Japan Trade Talks

In today's Asia-Pac session, TYM5 is 110-18+, -0-01 from closing levels. 

• US tsys finished the NY session showing a twist-flattening, with yields 3bps higher to 3bps lower, pivoting at the 7-year.
• US tsy yields rose to their daily highs after Retail Sales data was released, with the market focusing more on the stronger control group sales, but the move wasn’t sustained and yields subsequently tracked lower.
• Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. But the control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
• Headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.

Oil prices were moderately higher on Monday as tensions increased in the Middle East as the US struck the Iran-backed Houthi rebels after they said they would resume attacks on Red Sea shipping. The US has now added that Iran will be accountable for any further Houthi strikes, increasing the possibility of an escalation. The US will continue to target the rebel group until it stops attacking vessels.

• WTI was 0.5% higher at $67.48/bbl off the intraday low of $67.25. It has started Tuesday slightly lower at $67.34. The recent recovery is corrective and conditions remain bearish. Moving average studies are in a bear-mode position highlighting a dominant downtrend. Initial support is at $65.22, while resistance is $68.37.
• Brent is up 0.6% to $70.98/bbl after falling to $70.68. The benchmark is still down 2.5% this month driven by global growth worries following increased trade protectionism. Technicals still suggest a downtrend with initial support at $68.33, 5 March low. Pivot resistance and the 50-day EMA are at $73.15.
• The market has been concerned about the strength of demand for China for some time. It has been buoyed by recent plans to support the consumer and stabilise the troubled property market.
• The Trump administration has committed to increasing US oil output and today Energy Secretary Wright said that many new pipelines would be built.
• US president Trump is due to speak to Russia’s president Putin today about a Ukraine ceasefire deal. There seems a long way to go before there will be an easing of sanctions on Russian fossil fuel.

In local morning trade, NZGBs are 1bp cheaper after US tsys finished the NY session showing a twist-flattening, with yields 3bps higher to 3bps lower, pivoting at the 7-year. 

• US tsy yields rose to their daily highs after Retail Sales data was released, with the market focusing more on the stronger control group sales, but the move wasn’t sustained and yields subsequently tracked lower.
• Headline advance retail sales were much weaker than expected in February but the control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
• The focus remains on Wednesday's FPMC policy announcement.  
• Swap rates are 1bp higher.
• RBNZ dated OIS pricing is little changed. 25bps of easing is priced for April, with a cumulative 63bps by November 2025.
• Today, the local calendar will see Non-Resident Bond Holdings data.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.0% May-54 bond.
• The RBNZ will start the repurchase program of the Sep-25 inflation-indexed bond on March 21. The operation has no implications for monetary policy stance.