MNI EUROPEAN MARKETS ANALYSIS: US Tsys Extend Friday's Post-Payrolls Sell-Off

US TSYS: Friday’s Post-Payrolls Cheapening Extended In Today’s Asia-Pac Session

TYM4 is trading at 109-09+, -11 from NY closing levels.

• Looking at technical levels: Initial support lays at 109-09/09+ (Lower 1.0% 10-dma envelope/ Apr 3 Low), round number support then rests at 109-00, according to MNI’s technicals team. While to the upside resistance holds at 110-14 (20-day EMA), above here 110-25+/31+ (50-day EMA / Mar 27 high and key resistance).
• Cash US tsys have extended Friday’s post-payrolls cheapening in today’s Asia-Pac session, with benchmark yields 1-3bps higher. A flattening bias is present.
• Looking Ahead, the market’s focus is likely on US CPI and March FOMC Minutes on Wednesday and PPI on Thursday.

JGBS: Cheaper, Narrow Ranges, 5Y Supply Tomorrow

JGB futures are holding weaker, -15 compared to settlement levels, after dealing in a relatively narrow range.

• There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Labor & Real Cash Earnings and Current-Account Surplus data, and remarks from BoJ Governor Ueda that he had achieved his goal to change the bank's monetary stimulus into a simpler framework.
• (Bloomberg) -- Japan markets have a positive outlook on high sustained inflation and significant household savings, according to Jennifer Hsui, global head of index equity investments at BlackRock. (See link)
• Cash US tsys have extended Friday’s post-payrolls cheapening in today’s Asia-Pac session, with benchmark yields 1-3bps higher.
• Looking ahead, the market’s focus is likely on US CPI and March FOMC minutes on Wednesday and PPI on Thursday.
• Cash JGBs are mostly cheaper across the curve, with yields -0.8bp lower (10-year) to 1.6bps higher (2-year). The benchmark 5-year yield is 0.5bps higher at 0.387% ahead of tomorrow’s supply.
• Today’s BoJ Rinban Operations covering 1-3-year, 5-10-year and 25-year+ JGBs showed mixed results. Spreads were positive but the offer cover ratios were lower than previous outings.
• Swap rates are flat to slightly higher across maturities. Swap spreads are mixed.
• Tomorrow, the local calendar will see the Consumer Confidence Index and Machine Tool Orders data.

AUSSIE BONDS: Cheaper, Drifted Weaker As US Tsys Extend Post-Payrolls Sell-Off

ACGBs (YM -8.0 & XM -9.0) are holding cheaper after Friday's negative post-Payrolls lead-in from US tsys. Trading ranges have been relatively narrow, with news flow light. There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Home Loan Values data.

• Cash US tsys have extended Friday’s post-payrolls cheapening in today’s Asia-Pac session, with benchmark yields 1-3bps higher.
• Looking ahead, the market’s focus is likely on US CPI and March FOMC minutes on Wednesday and PPI on Thursday.
• Cash ACGBs are 7-9bps cheaper, with the AU-US 10-year yield differential 3bps lower at -23bps.
• Swap rates are 7-8bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -9.
• RBA-dated OIS pricing is 1-6bps firmer across meetings, with Mar-25 leading. A cumulative 30bps of easing is priced by year-end.
• Tomorrow, the local calendar sees Westpac Consumer and NAB Business Confidence, ahead of CBA Household Spending and Consumer Inflation Expectations on Thursday.
• On Wednesday, the RBNZ delivers its Policy Decision, with consensus unanimous in expecting the OCR to be left unchanged at 5.50%.
• Also on Wednesday, the AOFM plans to sell A$800mn of the 4.75% April 2027 bond.

NZGBS: Closed On A Weak Note, Focus On Wednesday’s RBNZ Policy Decision & US CPI

NZGBs closed on a weak note, with yields 10bps higher across benchmarks. With the domestic calendar empty light today, the local market has moved in sync with US tsys. Cash US tsys have extended Friday’s post-payrolls cheapening in today’s Asia-Pac session, with benchmark yields 1-3bps higher.

• Looking ahead, the focus for global bond investors is likely to be on US CPI and March FOMC minutes on Wednesday and PPI on Thursday.
• Locally, however, attention is focused on the RBNZ Policy Decision on Wednesday. Consensus is unanimous in expecting the OCR to be left unchanged at 5.50%.
• According to RBNZ dated OIS pricing, there is only a 4% probability assigned to a 25bp rate hike this week. However, what stands out more prominently is the indication that a cumulative easing of 62bps is still priced in by year-end.
• Swap rates closed 6-8bps higher, with the 2s10s curve steeper.
• Tomorrow, the local calendar will see the NZIER Business Opinion Survey.
• On Thursday, the NZ Treasury plans to sell NZ$275mn of the 3.0% Apr-29 bond, NZ$175mn of the 2.0% May-32 bond and NZ$50mn of the 2.75% May-51 bond.

STIR: RBNZ Dated OIS Pricing Is Firmer Ahead Of Wednesday’s RBNZ Policy Decision

This week’s domestic calendar highlight is the RBNZ Policy Decision on Wednesday. Consensus is unanimous in expecting the OCR to be left unchanged at 5.50%.

• (Bloomberg) Shadow Board members recommended the Reserve Bank keep the Official Cash Rate at 5.5% this week. Members “agreed that inflation was easing, but there was uncertainty over whether the pace of this easing would be enough to bring annual CPI inflation back within the inflation target band over the coming year”: NZIER
• According to RBNZ dated OIS pricing, there is only a 4% probability assigned to a 25bp rate hike this week. However, what stands out more prominently is the indication that a cumulative easing of 62bps is still priced in by year-end.

Figure 1: RBNZ Dated OIS Pricing (%)

Source: MNI – Market News / Bloomberg

Asian Equities Mostly Higher As Market Follows US Equities Higher

Regional Asian equities are higher today, following gains on Wall Street Friday after better-than-expected US payrolls, the US economy added 303,000 jobs in March, beating analyst expectations in the latest sign of labour market strength. This data indicates the US economy remains in good health but investors are optimistic that the US Federal Reserve will keep interest rates flat at its June policy meeting. Earlier Japan cash earnings data was mostly inline with expectations showing a decline in real wages for the 23rd consecutive month, while BoP Current Account Balance was below expectations. Australia had Home Loan Value data missed estimates.

• Japan equities are higher today mostly following the US markets higher. Earlier Labor Cash Earnings were inline with expectations at 1.8% y/y, while real wages were slightly higher than expected at -1.3% vs -1.4% y/y, but down from -0.6% in Jan, BoP Current Account Balance was ¥2644.2b vs ¥3050.0b expected. The Topix Bank Index is up 1.26%, up slightly more than the Topix which is up 1.21%, the Nikkei is up 1.35%.
• South Korean equities are slightly higher on Monday, there has been very little in the way of market headlines. Foreign Investors sold equities on Friday, however momentum remains positive with SK equities seeing the highest inflows of any market in the region, on the back of the corporate "Value-up" program and the ban on short selling. The Kospi is up 0.10% today
• Taiwanese equities have returned from their extended break, and are trading slightly higher, up 0.63%. Building and construction stocks are the top performing in the region as the benefit of the recent earthquake.
• Australian equities are unchanged today, financials are slightly lower, while Metals and Mining names are the top contributor to index. Earlier Australia Home Loan values were 1.5% vs 2.0% expected.
• Elsewhere in SEA, New Zealand equities are down 0.50%, while Philippines equities are down 0.83%, Indian equities are up 0.41%, Malaysian equities are up 0.20%

FOREX: USD/JPY Edges Higher Tests 151.80, AUD/JPY Breaks Fridays Highs Eyes 100.00

• USD/JPY opened at daily lows at 151.57 and has pushed higher throughout the day and now trades back towards the recent highs of the range at up 0.12% at 151.80.
• EUR/JPY broke above Friday's highs touching 164.54, before settling at 164.44 up 0.11% for the day
• AUD/JPY has edged higher, breaking Friday's highs of 99.843, the hit a high of 99.982 before paring daily gains. The pair now trades up 0.12% at 99.879.
• Looking ahead: Consumer Confidence Index and Machine Tool Orders Out Tuesday, while the focused will turn to PPI data on Wednesday

FOREX: NZD/USD Tests 0.6000 Ranges Tight, AUD/NZD Makes New Highs Of 1.0958

• NZD/USD has traded sideways on Monday, there has been very little in the way of market headlines. Ranges have remained very tight with the pair trading in just a 20-pip range, making highs of 0.6018, and lows of 0.6000 we now trade at 0.6012 as Europe logs in. Initial resistant holds at 0.6032 (20-day EMA), while initial support is at 0.5985 (Apr 5 low).
• The US-NZ 2y made highs on Friday at 14.6bps, we are 3.4bps lower at 18bps now.
• AUD/NZD has also traded sideways, with the pair unchanged for the day. Trading has been constrained to recent ranges although we did briefly make new YTD highs of 1.0958 early morning before making intraday lows of 1.0922, we now trade at 1.0941 as Europe logs in.
• The AU-NZ 2Y swap is 1bps lower at -83.5bps.
• Option expiries: there are no large strikes today, with upcoming notable strikes being Upcoming notable strikes: NZD/USD 0.5955 (NZD1.22b April 11), 0.5850 (NZD625m April 10), 0.6105 (NZD386m April 11). AUDNZD 1.0925 (US$201.38m April 9), 1.0950 (US$100.46m April 9)
• Looking ahead: RBNZ decision on Wednesday, while AU has Consumer & Business Confidence on Tuesday

GOLD: Surge Continues

Gold has surged by as much as 1.0% to reach a new all-time high of $2354 during today's Asia-Pacific session, following a 1.7% increase in Friday's closing. This recent upward momentum has occurred despite a rise in US Treasury yields during post-US Payrolls trading. The precious metal's ascent has been supported by a decline in the USD from its recent peak level, while tensions in the Middle East persist as a significant factor influencing market sentiment.

• (Bloomberg) -- Gold’s scorching run to an all-time high may seem easy to explain from a distance, given the fractious geopolitical climate and murky outlook for the global economy. The precious metal is famously seen as a “safe haven,” and the general view is that bullion prices should rise when interest rates fall — which many investors expect will happen later this year. (See link)
• According to MNI’s technicals team, the latest extension puts prices back into technically overbought territory on the 14-day RSI – although that's been no barrier to the persistent rally in precious metals in recent weeks.
• Having broken the $2,300 handle, the next objective is $2,329.50, a Fibonacci projection, which was tested in this session.