- Asian equities broadly rose on Wednesday, buoyed by optimism over China’s economic policy direction and signs of potential tariff relief from the U.S. administration.
- The USD is up against most of the majors, albeit away from best levels. USD/JPY is relatively steady, while higher beta plays like AUD and NZD have lost some ground.
- Australia's GDP data came out in line with consensus at 0.6% q/q and 1.3% y/y. RBNZ's Gov Adrien Orr resigned
MARKETS
US TSYS: Tsys Curve Twist Steepen, 10yr Hovers At 4.25%, Trump Speaks
- Tsys curves have twist-steepened throughout the session, yields are -2bps to +2.5bps. The long-end is underperforming today, with the US & WN contracts trading below Tuesday's lows. TU is -01¼ at 103-16+, while TY is trading -10 at 110-30.
- The 2yr is -1.5bps at 3.976%, while the 10yr is +1.1bps at 4.256%. The 2s10s is +2.5bps at 27.5bps, and are now steepened ~9bps since Monday.
- Concerns over US tariffs' economic impact have fueled bullish Treasury bets, with JPMorgan’s client survey showing the most bullish positioning in 15 years. Large block trades and surging call option activity suggest traders are targeting 10yr yields falling below 4%, with some positioning for as low as 3.85%.
- Trump has been speaking to a joint session of congress, He has spoken about cutting federal bureaucracy, fraud, and waste—highlighting DOGE. He justified the tariffs enacted today (20% on China, 25% on Mexico and Canada), framing them as tools to protect American workers, despite market turmoil, and proposed making car loan interest tax-deductible for US-made vehicles.
- On foreign policy, Trump doubled down on border security, announcing a government-wide immigration crackdown, and addressed his recent pause on Ukraine aid, shifting focus to domestic priorities. He also pushed for expanded executive authority and briefly touched on cryptocurrencies, reiterating his Sunday call for a strategic reserve, though without new details.
- Projected rate cuts through mid-2025 gaining vs. late Monday levels (*) as follows: Mar'25 at -1.4bp (-3.1bp), May'25 at -11.8bp (-14bp), Jun'25 at -27.9bp (-31.0bp), Jul'25 at -37.7bp (-42.6bp).
- Later today we have MBA Mortgage Applications, ADP Employment Change, S&P Global US Services PMI, Factory/Durable Goods Orders & ISM Services Index
AUSSIE BONDS: Cheaper, Q4 GDP In Line, Trump Pledges Balanced Budget
ACGBs (YM -6.0 & XM -10.0) are sharply cheaper but off Sydney session cheaps.
- Q4 GDP printed exactly in line with consensus at +0.6% q/q & 1.3% y/y up from 0.3% & 0.8% in Q3.
- Cash US tsys have twist-steepened, with yields 2bps lower to 2bps higher, in today’s Asia-Pac session after yesterday’s heavy session.
- Trump, in his address to Congress, praised the drop in interest rates and pledged to balance the federal budget. He urged Congress to pass tax cuts and mentioned discussions with major US car companies. He reiterated his stance on tariffs, stating that products not made in the US will face tariffs, in some cases “rather large ones.”
- Cash ACGBs are 6-10bps cheaper with the AU-US 10-year yield differential at +11bps.
- Swap rates are 5-8bps higher, with the 3s10s curve steeper.
- The bills strip has bear-steepened, with pricing -1 to -7.
- RBA-dated OIS pricing is 1-5bps firmer across meetings today. A 25bp rate cut in April is given an 11% probability, with a cumulative 59 bps of easing priced by year-end.
- Tomorrow, the local calendar will see Building Approvals, Private Sector Houses and Trade Balance data.
- The AOFM plans to sell A$700mn of the 1.00% 21 December 2030 bond on Friday.
NZGBS: Bear-Steepener, RBNZ Gov. Orr Resigns
NZGBs closed showing a bear-steepener, with benchmark yields 6-11bps higher.
- “Governor Adrian Orr unexpectedly resigned without giving a reason for his sudden departure. Orr will officially leave the bank on March 31, and Deputy Governor Christian Hawkesby will be Acting Governor until then. Finance Minister Nicola Willis will appoint a temporary governor from April 1 for a period of up to six months, following a recommendation from the RBNZ Board.” (per BBG)
- The ANZ World Commodity Price Index rose 3% month-over-month in February.
- Cash US tsys have twist-steepened, with yields 2bps lower to 2bps higher, in today’s Asia-Pac session after yesterday’s heavy session.
- Trump, in his address to Congress, praised the drop in interest rates and pledged to balance the federal budget. He urged Congress to pass tax cuts and mentioned discussions with major US car companies.
- Swap rates closed 5-9bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing is 1-6bps firmer across meetings today.
- Tomorrow, the local calendar will see CoreLogic Home Values, Volume of All Buildings data and Government 7-Month Financial Statements.
- 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 tomorrow.
ASIA STOCKS: Equities Edge Higher, HK Equities Lead, Sign Of Tariff Relief
Asian equities broadly rose on Wednesday, buoyed by optimism over China’s economic policy direction and signs of potential tariff relief from the U.S. administration. The MSCI Asia Pacific Index climbed 0.7%, with major gains in Hong Kong, Taiwan, and South Korea. Chinese markets rallied as the government reaffirmed its 5% growth target and announced increased fiscal spending, raising hopes for more stimulus. India rebounded after a historic 10-day losing streak, while Japan and South Korea gained on optimism surrounding trade. Australia was a notable laggard, with its market declining.
- Chinese stocks rose as Beijing maintained its 5% GDP growth target for 2025 and set its highest fiscal deficit in over three decades, signaling increased government support. Investors welcomed pledges to boost AI, 6G, and quantum computing, leading to strong gains in technology and semiconductor stocks. The Hang Seng Index jumped 1.7%, with the technology sector leading gains, while the CSI 300 index edged up 0.3%.
- Japan’s Nikkei Index rose 0.7%, while the broader Topix Index gained 0.6%. The market benefited from improving global sentiment following the Trump administration’s indication of potential tariff rollbacks. The weaker yen supported exporters, while investors also rotated into stocks that had underperformed in recent sessions.
- South Korea's KOSPI Index added 1%, driven by gains in semiconductors and heavy industries. SK hynix rose 1.34%, while steel giant POSCO Holdings gained 2.24%. However, defense stocks declined, with Hanwha Aerospace down 3.57% and Hanwha Ocean tumbling 7.17% after a prior-day surge. Investors responded positively to hopes that U.S. tariffs on Canada and Mexico might be reversed. The Korean won appreciated slightly against the dollar.
- Taiwan’s Taiex Index jumped 1.5%, bolstered by strong performance in semiconductor stocks, particularly TSMC. The global AI boom and expectations of more tech-friendly policies from China lifted sentiment.
- Australia's ASX 200 is 0.90% lower as Q4 GDP grew 0.6%, in line with expectations, reinforcing the RBA’s cautious stance on rate cuts. Weak risk sentiment and global trade concerns weighed on the market. The NZX 50 index fell 0.45% erasing early gains following RBNZ Governor Adrian Orr’s surprise resignation. Investors are now watching for signals on future monetary policy direction.
- The NSE Nifty 50 Index rose 0.6%, breaking a 10-day losing streak, as technology and consumer discretionary stocks rebounded. Infosys led gains with a 1.9% rise, while the Nifty India Consumption Index climbed 0.9%. The recovery comes after heavy foreign outflows of $14 billion year-to-date amid concerns over slowing economic growth and corporate earnings.
- Southeast Asian markets saw broad gains, with Indonesia’s Jakarta Composite Index surging 2.5% amid continued volatility, while Thailand’s SET Index rose 1.4% on improved risk sentiment. Vietnam’s VN Index edged up 0.1%, supported by S&P’s positive outlook on loan growth in the banking sector. Malaysia’s KLCI Index and Singapore’s Straits Times Index posted moderate gains of 0.6% and 0.3%, respectively, while the Philippines’ PSEi Index climbed 0.7% as investor sentiment improved.
OIL: Demand & Supply Concerns Drive Prices Below Initial Support
Oil prices have continued falling with both benchmarks trading below initial support today. WTI is down 1.0% to $67.60/bbl off the $67.50 low, breaching support at $67.75. Brent is down 0.5% to $70.73/bbl after a trough of $70.61, and is trading below support at $70.96 and opening key support at $69.59. The USD index is down slightly.
- The market remains pressured by concerns of oversupply following reports that OPEC would continue with plans to increase output from April but also by expected weaker global demand due to increased protectionism.
- Crude has been worried about demand strength from China for some time. Today it set its 2025 growth target at 5% which could result in more policy stimulus especially in the face of US tariffs.
- Today in his speech to Congress President Trump confirmed his commitment to increase US oil production. He also stuck with his plans to impose tariffs after Commerce Secretary Lutnick said that there could be a compromise with Canada and Mexico.
- A 10% tax was imposed yesterday on energy imports from Canada. In retaliation Ontario has introduced a 25% export tax on electricity going to Michigan, Minnesota and New York.
- Bloomberg reported that US oil inventories fell 1.455mn barrels last week after 640k the week before, according to people familiar with the API data. Gasoline was down 1.25mm, while distillate rose 1.1mn. The official EIA data is released today.
- Later US February ADP employment, services ISM/PMIs, final January orders and the Fed’s Beige book are released. European February services/composite PMIs and Q4 Italian GDP (2nd estimate) also print.
FOREX: USD Firms Against AUD, NZD But Away From Best Levels, Yen Outperforms
The USD is up against most of the majors, albeit away from best levels. USD/JPY is relatively steady, while higher beta plays like AUD and NZD have lost some ground.
- The session started with the USD on the backfoot and risk appetite supported, as US Commerce Secretary Lutnick stated that there may be tariff relief tomorrow for Canada and Mexico. CAD and MXN firm, although sit away from best levels now. USD/CAD was holding close to 1.4430, USD/MXN near 20.62.
- AUD/USD got to lows of 0.6234, but sits back around 0.6250/55 now. Earlier highs were at 0.6280. We had Trump address Congress earlier, where he confirmed that 25% tariffs on aluminium, copper and steel as well reciprocal tariffs will be implemented. This weighed on the A$ but follow through has been limited. Earlier data showed Australian GDP printing in line with expectations at 0.60%q/q.
- NZD/USD is down by a similar amount, last near 0.5650. We had surprising headlines that, RBNZ Governor was resigning. The Chair of The RBNZ board has since stated that this is for personal reasons. The RBNZ stated that Deputy Governor Christian Hawkesby will be Acting Governor until 31 March. From 1 April the Minister of Finance, on recommendation from the RBNZ Board, will appoint a temporary Governor for a period of up to six months.
- USD/JPY is little changed, last near 149.80, leaving the yen modestly outperforming. Deputy Governor Uchida stated rate hikes will continue, but didn't commit to any timeline.
- In the cross asset space, US equity futures are holding higher. Trump urged Congress to pass tax cuts, but also reiterated tariff plans. In the cash Tsy space, yields are lower at the front, but steady at the back end. The 10yr was last close to 4.24%.
- Looking ahead, the US February ADP employment, services ISM/PMIs, final January orders and the Fed’s Beige book are released. European February services/composite PMIs and Q4 Italian GDP (2nd estimate) also print.
STIR: RBNZ Dated OIS Pricing Firmer Today, Mixed Vs Pre-RBNZ Decision Levels
RBNZ dated OIS pricing is 1-6bps firmer across meetings today.
- Nevertheless, pricing remains mixed versus pre-RBNZ policy decision levels on February 19. While pricing for the April meeting is 2bps firmer, meetings from May to November are flat to 6bps softer.
- Currently, 25 bps of easing is priced for April, with a cumulative 71bps by November 2025.
Figure 1: RBNZ Dated OIS Today vs. Yesterday (%)
Source: MNI – Market News / Bloomberg
STIR: RBA Dated OIS Pricing Firmer Today But Mixed Vs. Pre-RBA Decision Levels
RBA-dated OIS pricing is 1-6bps firmer across meetings today.
- Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through May are 2-4bps firmer, while those beyond are flat to 10bps softer.
- Today, Q4 GDP printed exactly in line with consensus at +0.6% q/q & 1.3% y/y up from 0.3% & 0.8% in Q3, but above the RBA’s February forecast of 1.1% y/y.
- A 25bp rate cut in April is given a 10% probability, with a cumulative 58 bps of easing priced by year-end (based on an effective cash rate of 4.09%).
Figure 1: RBA-Dated OIS – Today Vs. Pre-RBA Levels
Source: MNI – Market News / Bloomberg
AUSTRALIA DATA: No Productivity Growth In 2024, ULC Turn Higher In Q4
Q4 productivity growth was not as bad as the RBA was expecting but it still fell for the third consecutive quarter to be down 1.2% y/y, a deterioration from Q3’s -0.6% y/y. Today RBA Deputy Governor Hauser identified productivity growth as the key issue. Monetary policy cannot do anything about it and can only react to it. He also said it may be the reason why wage growth is slowing despite the strong labour market.
- The RBA forecast productivity to fall 1.9% y/y in Q4 and it has it improving to+0.7% y/y in Q4 2025 and reaching its historical average in H1 2026, but it has consistently revised down its expectations. While it is a long-term concept, its weak performance could result in less monetary easing.
- Hours worked continued to outpace GDP growth rising 0.7% q/q in Q4, the fourth consecutive rise. In 2024, they were 1% above 2023 resulting in no improvement in productivity over the year.
- With productivity growth falling 1.2% y/y in Q4, then wage growth consistent with inflation at the RBA’s band mid-point of 2.5% is only 1.3% compared with Q4’s WPI at 3.2% y/y, assuming productivity continues to contract at around the same rate as the end of 2024.
- Unit labour costs (ULC) rose 1.6% q/q to be up 4.7% y/y tentatively implying that the moderation in ULC’s has stalled as the recent trough was 4.5% in Q3. ULC growth eased to 5.1% in 2024 from 6.6% but remains well above the 2.8% series average.
Australia productivity vs ULC y/y%
Source: MNI - Market News/ABS
AUSTRALIA DATA: Strongest Quarterly Growth In Two Years, Has It Continued?
Q4 GDP printed exactly in line with consensus at +0.6% q/q & 1.3% y/y up from 0.3% & 0.8% in Q3, but above the RBA’s February forecast of 1.1% y/y. It is in line with the quarterly average over 2018-19. Growth was supported by private, public and overseas demand with domestic demand adding 0.5pp and net exports 0.2pp with the statistical discrepancy detracting 0.15pp. The broad based pickup in Q4 growth is a good sign that the economy is recovering but monthly data will be watched closely to see if it continued in Q1.
Australia GDP %
Source: MNI - Market News/ABS
- The ABS notes that GDP/capita rose 0.1% q/q, the first rise in eight quarters.
- Household consumption has been an area of uncertainty for some time and it rose 0.4% q/q in Q4 to be up 0.7% y/y, which is still weak but up from 0.3% y/y in Q3. Tax cuts and lower inflation have helped real disposable incomes and discounting also encouraged spending, but essential expenditure made a significant contribution to Q4. The household savings ratio rose 0.2pp to 3.8%.
- Government spending slowed to 0.7% q/q but picked up to 5.1% y/y from 4.7%, the fastest annual rate since the election quarter of Q2 2022. Public corporations’ GFCF remained robust rising 9% q/q to 19% y/y driven by transport and electricity infrastructure, but was partially offset by general government GFCF.
- Private investment added 0.1pp to growth driven by intellectual property but it remains soft up only 0.8% y/y down from Q3’s 1.4%. Machinery & equipment was flat on the year, non-dwelling construction fell 5% y/y, while dwellings grew 2.5% y/y. Inventories added 0.1pp to growth.
- Net exports contributed 0.2pp to GDP but export growth remained soft rising only 0.7% q/q to be up 1.7% y/y although this was up from -1.2% y/y. Exports were driven by services with goods flat. Imports rose only 0.1% q/q in Q4 but are 5.8% y/y higher.
Australia domestic demand y/y%
Source: MNI - Market News/ABS
RBA: Shift In Risks Drove Rate Cut Timing
RBA Deputy Governor Hauser spoke at the AFR Business Summit on uncertainties around global trade and the domestic labour market. He said that while unchanged rates resulted in a “modest undershoot” of the band mid-point over the forecast horizon, the timing of the cut was driven by judgement on the risks which had shifted with greater downside risks to inflation from trade uncertainties but lower upside risks to inflation.
- He said that there has been progress in bringing inflation back to the band but that the RBA can’t declare victory yet. He also identified productivity growth as the key issue which monetary policy can’t do anything about and can only react to. It may be the reason for lower wage growth despite the tight labour market.
- Hauser noted that as Australia increased rates less than others, it will then reduce them by less too. But it began easing at around the same point from target as other countries.
- The RBA is alert to the possibility of labour market overheating but is unclear as to the level of spare capacity, as it is unusual to have strong jobs growth with subdued activity. It may reflect the gap between non-market and market employment gains.
- While Australia has little direct trade exposure to the US compared to most other countries, its growth will be negatively impacted through indirect effects. The RBA is unsure if a trade war has actually begun, but it will monitor the situation closely for what it means for Australia. Its scenario analysis suggests that it will be ambiguous for inflation.
- There are many things that still need to be made clear, including retaliatory measures and the FX response. As a result, a trade scenario wasn’t included in the RBA’s February base case. So far the equity risk premium has been very low but has adjusted recently.
- The uncertainty alone is a problem with the Fed estimating it reduced global growth 1pp in 2019 and Hauser thinks it could be larger this time.
EQUITIES: Huge Tsys Block Seller May Have Bought Equities
- The record Treasury futures trade appears to have been an unwinding of a long position in the TYM5 contract, as open interest in the contract dropped. The Tsys block trade saw a seller offload 78,000 TYH4 futures in early London trading, with a DV01 $5.1m.
- Simultaneously, S&P 500 futures surged 2.29%, while volume also increased as Treasuries sold off. Leading into Tuesday’s US session, bond contracts had been rising alongside open interest before an abrupt decline began when equities were at intraday lows, as per BBG
Chart. TYM5 Sells Off As S&P Futures Rally
ASIA STOCKS: Foreign Investors Continue Dumping Asian Stocks
Taiwan continues to see heavy outflows taking the past 5 sessions to almost $5b in outflows, India also continues to see heavy outflows.
- South Korea: Recorded +$11m in inflows Tuesday, bringing the 5-day total to -$1.78b. YTD flows remain negative at -$3.94b. The 5-day average is -$356m, worse than the 20-day average of -$129m and the 100-day average of -$119m.
- Taiwan: Recorded -$1.34b in outflows Tuesday, bringing the 5-day total to -$4.98b. YTD flows remain negative at -$7.59b. The 5-day average is -$996m, significantly worse than the 20-day average of -$214m and the 100-day average of -$147m.
- India: Posted -$534m in outflows Monday, bringing the 5-day total to -$2.77b. YTD outflows remain heavy at -$14.31b. The 5-day average is -$553m, worse than the 20-day average of -$294m and the 100-day average of -$225m.
- Indonesia: Recorded +$36m in inflows Tuesday, bringing the 5-day total to -$281m. YTD flows remain negative at -$1.31b. The 5-day average is -$56m, slightly worse than the 20-day average of -$53m and the 100-day average of -$33m.
- Thailand: Saw -$26m in outflows Tuesday, bringing the 5-day total to -$230m. YTD flows remain negative at -$597m. The 5-day average is -$46m, worse than the 20-day average of -$13m, and the 100-day average of -$18m.
- Malaysia: Posted -$42m in outflows Tuesday, bringing the 5-day total to -$225m. YTD flows are negative at -$1.26b. The 5-day average is -$45m, worse than the 20-day average of -$26m, but better than the 100-day average of -$28m.
- Philippines: Recorded -$5m in outflows Tuesday, bringing the 5-day total to -$62m. YTD flows remain negative at -$259m. The 5-day average is -$12m, worse than the 20-day average of -$8m, and the 100-day average of -$7m.
Table 1: EM Asia Equity Flows
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 05/03/2025 | 0730/0830 | *** |  CH | CPI |
| 05/03/2025 | 0745/0845 | * |  FR | Industrial Production |
| 05/03/2025 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 05/03/2025 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 05/03/2025 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 05/03/2025 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 05/03/2025 | 0850/0950 | ** | FR | S&P Global Services PMI (f) |
| 05/03/2025 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 05/03/2025 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 05/03/2025 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 05/03/2025 | 0900/1000 | *** | IT | GDP (f) |
| 05/03/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 05/03/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 05/03/2025 | 0930/0930 | ** |  GB | S&P Global Services PMI (Final) |
| 05/03/2025 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 05/03/2025 | 1000/1100 | ** | EU | PPI |
| 05/03/2025 | 1000/1100 | * | IT | Retail Sales |
| 05/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 05/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 05/03/2025 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 05/03/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 05/03/2025 | 1430/1430 | GB | TSC: Bailey/Pill/Taylor/Greene | |
| 05/03/2025 | 1430/1430 | GB | Greene annual report | |
| 05/03/2025 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 05/03/2025 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 05/03/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/03/2025 | 1500/1000 | ** | US | Factory New Orders |
| 05/03/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 05/03/2025 | 1900/1400 | US | Fed Beige Book | |
| 05/03/2025 | 2315/1815 | US | New York Fed's Roberto Perli | |
| 06/03/2025 | - | EU | European Central Bank Meeting | |
| 06/03/2025 | 0030/1130 | * |  AU | Building Approvals |
| 06/03/2025 | 0030/1130 | ** | AU | Trade Balance |
| 06/03/2025 | 0645/0745 | ** | CH | Unemployment |
| 06/03/2025 | 0700/0800 |  SE | Flash CPI | |
| 06/03/2025 | 0830/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 06/03/2025 | 0930/0930 | GB | Decision Maker Panel data | |
| 06/03/2025 | 0930/0930 | ** | GB | S&P Global/CIPS Construction PMI |
| 06/03/2025 | 1000/1100 | ** | EU | Retail Sales |
| 06/03/2025 | 1100/0600 | *** |  TR | Turkey Benchmark Rate |
| 06/03/2025 | 1315/1415 | *** | EU | ECB Deposit Rate |
| 06/03/2025 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 06/03/2025 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 06/03/2025 | 1330/0830 | *** | US | Jobless Claims |
| 06/03/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 06/03/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 06/03/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 06/03/2025 | 1330/0830 | ** | US | Trade Balance |
| 06/03/2025 | 1330/0830 | ** | US | Non-Farm Productivity (f) |
| 06/03/2025 | 1345/1445 | EU | ECB Press conference post Governing council meeting | |
| 06/03/2025 | 1345/0845 | US | Philly Fed's Pat Harker |
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