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EXECUTIVE SUMMARY

  • FED CHAIR POWELL: ECONOMY MAKING REAL PROGRESS, BUT NOT FOR EVERYONE (BBG)
  • WILLIAMS SUGGESTS FED'S LIFTOFF TO BE GRADUAL (MNI)
  • FED'S BARKIN SEES HIGHER INFLATION THIS YEAR, BUT THEN A REVERSAL IN 2022
  • FDA SET TO APPROVE PFIZER VACCINE FOR AGES 12 TO 15 BY NEXT WEEK (NYT)
  • RBA TWEAKS ECONOMIC ASSESSMENT, TO MAKE DECISION ON 3-YEAR YIELD TARGET ACGB IN JUL

Fig. 1: AUD 1-Year/1-Year & 2-Year/1-Year Swap Rates (%)

Source: MNI - Market News/Bloomberg


UK

BREXIT: Brussels indicated on Monday it is willing to be flexible to ease the impact of post-Brexit trade checks on businesses in Northern Ireland, while warning that only British alignment with the bloc's food safety rules can remove some of the irritants that have emerged. EU Brexit commissioner Maros Sefcovic and his UK opposite number David Frost are overseeing talks on how to implement the so-called Northern Ireland protocol, after the UK's move to unilaterally suspend some administrative demands linked to the new rules triggered legal action from Brussels. Both sides are striving to work out how to apply the new trading system in a way that reduces tensions that helped stoke rioting in the region last month. (FT)

POLITICS: Conservative Party staff are in uproar over the costly revamp of Boris Johnson's Downing Street flat after officials were told there was no money for pay rises. (Telegraph)

EUROPE

GERMANY: INSA poll for Bild: CDU/CSU 24%, Greens 24%. (RTRS)

ITALY: Italy's plan to kick-start its economy using grants and loans from the European Union's recovery fund won't be successful without significant buy-in from private investors, Infrastructure and Mobility Minister Enrico Giovannini warned in an interview. "Everyone is talking just about public funds, but that's a distorted view," the minister said. In a bid to shift the focus more toward a mix of public and private funding, Giovannini is setting up a commission within his ministry to explore ways to use other financial instruments for investment. The ministry has joint responsibility for investing 40.7 billion euros ($49 billion) of the funding alloted to the country under the Next Generation EU program. Other European and national development programs will add an additional 20 billion euros. (BBG)

ITALY/BTPS: Buyback transaction of government bonds via Bank of Italy, Treasury says. Bonds to be bought back are:

  • BTP 01 Aug 2021 3.75 %
  • BTP 01 Sep 2021 4.75 %
  • CTZ 29 Nov 2021
  • BTP 15 Dec 2021 2.15 % (BBG)

IRELAND: The Irish manufacturing sector surged in April at a record pace as production rose and output expectations reached a new peak. "Firms widely expect vaccination programmes to allow a full reopening of economies, providing a major fillip to business activity," said Oliver Mangan, chief economist at AIB. The headline AIB Manufacturing Purchasing Managers' Index (PMI) recorded a level of 60.8 in April, indicating a strong start to the second quarter of the year as industrial activity globally rebounded. That follows 57.1 recorded in March, up from 52.0 in February and 51.8 in January. Any figure greater than 50 indicates overall expansion of the sector. The headline PMI was elevated by lengthening delivery times for suppliers. Output prices rose at a record rate in April as input costs soared for the month. (Irish Times)

U.S.

FED: Federal Reserve Chair Jerome Powell said that while the U.S. economic recovery is "making real progress," the gains have been uneven following a downturn that cut hard along lines of race and income. "The economic outlook here in the United States has clearly brightened," Powell said Monday in remarks before the National Community Reinvestment Coalition. Still, "it has been slower for those in lower paid jobs," he said. (BBG)

FED: MNI BRIEF: Williams Suggests Fed's Liftoff to Be Gradual

  • New York Federal Reserve President John Williams said Monday that surveys showing the Fed would raise rates gradually after liftoff are "consistent with our [the Fed's] framework" - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: MNI POLICY: Williams Says Fed's Dual Goals Are Still Far Away

  • New York Federal Reserve President John Williams said Monday that signs the current economic recovery could be the fastest since the early 1980s still aren't sufficient to consider pulling back on monetary stimulus. "It's clear there is a big shift in the economy, and the outlook has improved," said Williams in prepared remarks. "But let me emphasize that the data and conditions we are seeing now are not nearly enough for the FOMC to shift its monetary policy stance" - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: Richmond Federal Reserve President Thomas Barkin told CNBC on Monday that he sees inflation pressures building this year that he expects to subside in 2022. "I think we will see price pressure this year. You've got a very strong demand situation, and you've got constraints in supply," the central bank official said during a "Closing Bell" interview. "When those things happen, you're definitely going to see price pressure." However, Barkin added that he expects those pressures to subside as economic dynamics change through the year and the economy returns to a more normal state. (CNBC)

FED: Loan officers at U.S. banks reported easing standards on most business and household loans in the first three months of the year as more of the country reopened amid accelerating vaccination rates. (RTRS)

ECONOMY: MNI INTERVIEW: Factory Prices May Rise Fastest Since 1950s-ISM

  • U.S. manufacturing price gains may surge to the fastest pace since the 1950s in the next few months on widespread shortages of parts, materials, and workers, Institute for Supply Management chair Tim Fiore told MNI Monday. Previous ISM estimates that foresaw price growth of 2.5% over the first half of 2021 are likely to double to 5%, according to revised preliminary estimates the group hasn't published yet, Fiore said in a phone interview. Estimates for the second half of the year are also being increased, and even with some moderation late this year, the 2021 price gain will likely be around 3%, he said - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FISCAL: MNI BRIEF: Treasury Raises Q2 Borrowing Estimate by USD368B

  • The U.S. Treasury Department on Monday announced it expects to borrow USD463 billion in privately held net marketable debt in the second quarter, USD368 billion more than previously announced in February. Treasury is assuming a cash balance of approximately USD450 billion at the expiration of the debt limit suspension on July 31, more than the roughly USD130 billion that market analysts have expected. Officials also raised their end-of-June cash balance goal to USD800 billion, from USD500 billion previously, citing the Biden administration fiscal support in the face of the coronavirus. The Treasury's cash balance on Friday was just over USD900 billion. For the third quarter, the Treasury plans to issue USD821 billion in net marketable debt, assuming an end-June cash balance of USD700 billion. The Treasury's quarterly refunding will be released at 8:30 a.m. May 5 - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FISCAL: President Joe Biden and Republican Senate Minority Leader Mitch McConnell toughened their positions Monday over the tax increases for millionaires and corporations that Biden has proposed to fund his sweeping infrastructure and education plans. "We're open to doing a roughly $600 billion package which deals with what all of us agree is 'infrastructure,'" McConnell said at an event in Kentucky. "And to talk about how to pay for that in any way other than reopening the 2017 tax reform bill." Raising the corporate tax rate to 28%, up from 21%, is the linchpin of Biden's proposal to pay for the American Jobs Plan, a massive revamping of the nation's infrastructure and energy sector that would create jobs in the wake of the coronavirus pandemic. (CNBC)

FISCAL: Wealthy families could face combined tax rates of as much as 61% on inherited wealth under President Joe Biden's tax plan, according to a recent analysis and tax accountants. As part of his American Families Plan, Biden is proposing to nearly double the top tax rate on capital gains and eliminate a tax benefit on appreciated assets known as the "step-up in basis." Combining the estate tax, the new higher capital gains rate and the repeal of step-up in basis could bring total effective marginal rates as high as 61%, according to an analysis from the Tax Foundation. The rate would be the highest such rate in nearly a century, according to the tax policy research group. (CNBC)

CORONAVIRUS: The move opens up the U.S. vaccination campaign to millions more Americans. The Food and Drug Administration is preparing to authorize use of the Pfizer-BioNTech Covid-19 vaccine in adolescents 12 to 15 years old by early next week, according to federal officials familiar with the agency's plans, opening up the nation's vaccination campaign to millions more Americans. The news is highly anticipated: Eager parents have been counting down the weeks since Pfizer announced results from its trial in adolescents, showing the vaccine is at least as effective in that age group as it is in adults. Vaccinating children is also key to raising the level of immunity in the population and bringing down the numbers of hospitalizations and deaths. (New York Times)

CORONAVIRUS: Most capacity restrictions will be lifted across New York, New Jersey and Connecticut, while all-day subway service will resume in New York City, as lower virus rates and higher vaccinations help move the region toward normalcy. "This is a major reopening of economic and social activity," New York Governor Andrew Cuomo said Monday at a briefing. Round-the-clock subway operations in the city that never sleeps will resume May 17, while capacity restrictions on restaurants, theaters, stores and museums will end May 19, Cuomo said. (BBG)

CORONAVIRUS: Declaring Florida's COVID-19 emergency over, Gov. Ron DeSantis on Monday signed an executive order invalidating all remaining local emergency COVID orders and signed a bill into law that bars businesses, schools and government entities across Florida from asking anyone to provide proof of a COVID-19 vaccination. (Miami Herald)

MARKETS: The New York Stock Exchange is opening up further for vaccinated traders. Companies whose staff are based at the historic NYSE floor will be permitted to raise their headcount if 100% of employees at the site can prove they're fully vaccinated, according to a memo from NYSE Chief Operating Officer Michael Blaugrund. The changes go into effect May 10 and are "based on improvement to public health conditions in the New York City area and the continuing progress of the nationwide vaccination rollout," Blaugrund wrote in the memo. (BBG)

EQUITIES: SEC Chairman Gary Gensler is set to be a witness at the House Financial Services Committee's May 6 hearing on GameStop trading volatility, according to committee site. Gensler was expected to testify but the committee hadn't released witness list until Monday. Other witnesses are Michael Bodson, president and CEO of the Depository Trust & Clearing Corp., and Robert Cook, president and CEO of the Financial Industry Regulatory Authority. (BBG)

OTHER

U.S./UK/CHINA: The top diplomats from the U.S. and the U.K. pushed back against what they called Chinese and Russian violations of the global order, pledging unity in what both nations call a priority: uniting democratic societies against autocratic ones. "What we are trying to do is to uphold the international rules-based order that our countries have invested so much in," U.S. Secretary of State Antony Blinken said at a briefing in London alongside U.K. Foreign Secretary Dominic Raab. "The challenge for us is to demonstrate in very concrete ways that we can deliver for our citizens." Raab echoed that view, saying there's an increasing need for "agile clusters of like-minded countries that share the same values." (BBG)

GEOPOLITICS: China to convene high-level UN meeting on May 7 led by Wang Yi. (BBG)

GLOBAL TRADE: Nippon Telegraph & Telephone Corp. infrastructure units will replace their Chinese-made drones with those made in Japan or elsewhere, in line with the Japanese government's efforts to shut out potential cybersecurity risks, Nikkei reported Tuesday, without saying where it got the information. (BBG)

CORONAVIRUS: The World Health Organization is closely following 10 coronavirus variants "of interest" or "of concern" across the world, including two that were first detected in the U.S. and a triple-mutant variant that's wreaking havoc in India, as potential global public health threats. New Covid-19 strains pop up every day as the virus continues to mutate, but only a handful make WHO's official watchlist as a "variant of interest" or the more serious designation "variant of concern," which is generally defined as a mutated strain that's more contagious, more deadly and more resistant to current vaccines and treatments. (CNBC)

CORONAVIRUS: U.S. Trade Representative Katherine Tai met virtually with World Intellectual Property Organization Director-General Daren Tang to discuss the role of intellectual property in dealing with the pandemic. They spoke about "specific challenges confronting developing countries, and the proposed waiver to certain provisions of the World Trade Organization's agreement on trade- related aspects of intellectual property rights for the Covid-19 pandemic," the USTR said in an emailed statement. (BBG)

CORONAVIRUS: The Biden administration will support Pfizer Inc.'s move to begin exporting U.S.-made doses of its coronavirus vaccine, as the White House starts to unleash U.S. production for shot- starved nations abroad. The governments of Mexico and Canada said last week that they expected to begin receiving doses of Pfizer's vaccine from the U.S., the first time the company's U.S.-made shots are known to have been delivered to any buyer other than the American government itself. (BBG)

HONG KONG: Hong Kong is reviewing a decision to make vaccinations mandatory for foreign domestic workers after a wave of criticism, Chief Executive Carrie Lam said. "After listening to voices in the society, I have requested the Labour and Welfare Bureau to review the justification, feasibility, and discuss with experts including consulates of relevant countries where the foreign domestic helpers mainly come from." The decision had led to an outcry from officials in the Philippines, home to many such workers, and was branded "very discriminatory" by Cynthia Tellez, head of the Mission for Migrant Workers.

JAPAN: Hokkaido to ask govt to apply virus measures. (Nikkei)

AUSTRALIA/CHINA: Five years ago, Australia's defense chief dismissed worries over a Chinese company leasing a port used by U.S. Marines as "simply absurd." Now the government in Canberra is weighing whether to force a sale due to national security concerns. Defence Minister Peter Dutton confirmed over the weekend that his department will advise the government on what to do with the port. Asked whether the government would consider forced divestiture, he told the Sydney Morning Herald that officials would consider the national interest. (BBG)

RBA: The RBA marked to market its assessment of the domestic economy, ahead of the official release of the SoMP on Friday. The bank now expects GDP growth of 4.75% in in '21 (prev. 3.5%) & 3.5% in '22 (unch. from prev. 3.5%), while it sees unemployment at ~5.0% at the end of '21 (prev. 6.0%) and ~4.5% at the end of '22 (prev. 5.5%). On the inflation side, the Bank noted that "despite the strong recovery in economic activity, the recent CPI data confirmed that inflation pressures remain subdued in most parts of the Australian economy." Still, it now looks for underlying inflation of 1.5% come the end of '21% (prev. 1.25%) and 2.0% in mid '23 (prev. 1.75%), which is a little more upbeat.

  • The main point of note saw the Bank state that "at its July meeting, the Board will consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond. The Board is not considering a change to the target of 10 basis points." The Bank also stressed that "the Board is prepared to undertake further bond purchases to assist with progress towards the goals of full employment and inflation. The Board places a high priority on a return to full employment." The highlight of its priority in the final sentence of that passage is a new inclusion to the statement but isn't particularly shocking.
  • The Bank also confirmed that "the date for final drawings under the Term Funding Facility is 30 June 2021."
  • The Bank repeated its commentary surrounding the housing market, in that it "will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained." Comments on house prices were widened to cover "prices rising in all major markets."
  • The Bank concluded with "the Board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest." The final sentence previously read "the Board does not expect these conditions to be met until 2024 at the earliest." This tweak was likely a product of the aforementioned updated projections surrounding inflation and unemployment. (MNI)

RBNZ: The Reserve Bank of New Zealand (RBNZ) said Governor Adrian Orr will not be present at Wednesday's post Financial Stability Report (FSR) press conference due to illness. Orr will also not attend the subsequent hearing before Parliament's Finance and Expenditure Committee, the bank said in a statement. Deputy Governor Geoff Bascand will head the FSR press conference. (RTRS)

NEW ZEALAND: Almost $1 billion that was allocated for the Covid-19 response last year was never spent, and Finance Minister Grant Robertson has put it back into the Covid fund to spend on the recovery. Robertson delivered the first of his pre-Budget speeches this morning to the Wellington Chamber of Commerce, saying Budget 2021 would be a "recovery Budget". He also announced he had been tasked by Prime Minister Jacinda Ardern with heading a new unit in her department that was responsible for ensuring delivery on the Government's priorities such as mental health, infrastructure, climate change, and housing. It is a response to the pressure Labour has come under over its delivery on some fronts – including housing and infrastructure - and an attempt to re-ignite Labour's former priorities as part of the Covid recovery. (NZ Herald)

SOUTH KOREA: South Korea's inflation that accelerated in April was mainly due to base effect after oil prices and food prices gained compared to the previous year, Vice Finance Minister Lee Eog-weon says in a meeting. Inflation may temporarily exceed 2% level in 2Q, though possibility that annual CPI to top 2% is "limited". Government to continue to strengthen efforts to stabilize prices so temporary price gains in 2Q don't spread to excessive inflationary expectation. (BBG)

SOUTH KOREA: South Korea is drafting a bill to revise a law in order to provide legal grounds for the sale of government bonds to individual investors, according to a finance ministry statement. (BBG)

NORTH KOREA: China's ambassador to the United Nations took the rotating presidency of the Security Council on Monday by calling on the Biden administration to ease the economic pressure campaign on North Korea and engage in dialogue. Referring to a recently completed White House review of North Korea policy, Chinese Ambassador Zhang Jun said "We hope the result of the review will give more importance to diplomatic efforts, to dialogue, instead of emphasizing too much the importance of extreme pressure." (BBG)

CANADA: Kenney encouraged all Albertans to take COVID-19 seriously. He added that a new set of restrictions are being developed by the province and that more details will be announced Tuesday. "Put our healthcare system first," Kenney said. "We all want to see this pandemic over. (CTV)

MEXICO: AstraZeneca will produce 3m to 6m vaccine doses a week in Mexico, Finance Minister Arturo Herrera said in a video posted to his Twitter account. 55% of AstraZeneca's Mexico production will be for use in the country, 45% for exportation. Given that, Mexico would have about 8m, up to 12m, doses per month, Herrera said. Mexico sought other vaccine contracts when deliveries were delayed, as with Pfizer. Mexico has paid about 17b pesos of 32b pesos budgeted for Covid-19 vaccines. (BBG)

BRAZIL: Brazil's health authority said it has serious doubts about the safety and efficacy of Russia's Sputnik V Covid-19 vaccine and defended its decision to block the shot for emergency use, saying Russia lacks vaccine experience and was defensive in its responses to the agency. The agency, Anvisa, declined to approve the vaccine last week despite a shortage of Covid-19 shots in the hard-hit country and a Sputnik V rollout in more than 60 countries that have already approved the vaccine for use. Brazil is concerned the vaccine could contain active adenovirus particles, responsible for the common cold, which could make recipients sick, said Gustavo Mendes, Anvisa's medicines and biological products manager, in an interview Monday. (WSJ)

BRAZIL: Brazil's economy recovery in "V" shape, but sectors such as events and tourism still facing difficulties, Economy Minister Paulo Guedes told journalists in Brasilia. Tax cuts approved by Congress in bill to support events sector will be vetoed, Economy Ministry's Special Secretary Carlos da Costa said. Gov't can pay early 13th salary payment. (BBG)

BRAZIL: Brazilian President Jair Bolsonaro will approve a measure passed by Congress designed to bring economic relief to the events sector, Economy Ministry official Carlos da Costa said on Monday. A wide range of companies will benefit from the package, including hotels, cinemas, nightclubs, theaters and convention operators. (RTRS)

RUSSIA: The European Union summoned Russia's ambassador to the bloc on Monday to condemn Moscow's decision to bar eight officials from entering the country, which the Kremlin said was in retaliation for sanctions imposed on Russian citizens by the EU. (RTRS)

IRAN: The US and the UK have dismissed reports coming out of Iran that they are thrashing out a prisoner exchange deal with Tehran that could see the imminent release of a British-Iranian woman, Nazanin Zaghari-Ratcliffe, and four Americans, among others. (TRT World)

IRAQ: Three rockets were fired Monday evening toward Iraq's Balad air base north of Baghdad, a security source told AFP, but without causing US casualties or damage, the Pentagon said, citing initial reports. The rockets fell in an area where US company Sallyport — the contractor that maintains F-16 aircraft Iraq has purchased from the US in recent years — is located, the security source said. "Initial reports are that there are no US casualties or damages," said Commander Jessica McNulty, Pentagon spokesperson. (Arab News)

FOREX: Michael Hsu, a senior Federal Reserve official responsible for supervising the largest US banks, is poised to become the next acting comptroller of the currency, ending weeks of uncertainty over the US financial regulator's leadership. Janet Yellen, the US Treasury secretary, was set to tap Hsu for a senior post at the Office of the Comptroller of the Currency that would pave the way for him to become acting chief, according to people familiar with the matter. The timing of the announcement could not be determined. Hsu is currently associate director of the Fed's bank supervision and regulation division. (FT)

OVERNIGHT DATA

AUSTRALIA MAR TRADE BALANCE +A$5.574BN; MEDIAN +A$8.200BN; FEB +A$7.595BN
AUSTRALIA MAR EXPORTS -2% M/M; MEDIAN +4%; FEB -1%
AUSTRALIA MAR IMPORTS +4% Y/Y; MEDIAN +8%; FEB +5%

AUSTRALIA MAR HOME LOANS VALUE +5.5% M/M; FEB -0.3%
AUSTRALIA MAR INVESTOR LOAN VALUE +12.7% M/M; FEB +4.5%
AUSTRALIA MAR OWNER-OCCUPIER LOAN VALUE +3.3% M/M; FEB -1.8%

AUSTRALIA ANZ ROY MORGAN WEEKLY CONSUMER CONFIDENCE 112.7; PREV. 112.4

Confidence rose by 0.3% across Australia over the past week, with a gain of 1.3% in Perth. The magnitude of the Perth gain is much smaller than the one following Perth's lockdown at the end of January - possibly because another few cases of infection and the bad news out of India have the city and country somewhat on edge. There was some strength in 'current financial conditions', which rose by 2.2%. This gain could be a result of the announcements made about the Budget such as additional funding for childcare. Overall confidence is just above the long-run average. (ANZ)

SOUTH KOREA APR CPI +2.3% Y/Y; MEDIAN +2.1%; MAR +1.5%
SOUTH KOREA APR CPI +0.2% M/M; MEDIAN 0.0%; MAR +0.1%
SOUTH KOREA APR CORE CPI +1.4% Y/Y; MEDIAN +1.2%; MAR +1.0%

MARKETS

SNAPSHOT: RBA Tweaks Econ Assessment, Will Make Decision On 3-Year Tgt In July

Below gives key levels of markets in the second half of the Asia-Pac session:

  • Nikkei 225 is closed
  • ASX 200 up 29.804 points at 7058.6
  • Shanghai Comp. is closed
  • JGBs are closed
  • Aussie 10-Yr future up 1.5 ticks at 98.315, yield down 1.8bp at 1.735%
  • U.S. 10-Yr future -0-01 at 132-09+, cash Tsys are closed
  • WTI crude down $0.07 at $64.42, Gold down $4.06 at $1788.82
  • USD/JPY up 20 pips at Y109.27
  • FED CHAIR POWELL: ECONOMY MAKING REAL PROGRESS, BUT NOT FOR EVERYONE (BBG)
  • WILLIAMS SUGGESTS FED'S LIFTOFF TO BE GRADUAL (MNI)
  • FED'S BARKIN SEES HIGHER INFLATION THIS YEAR, BUT THEN A REVERSAL IN 2022
  • FDA SET TO APPROVE PFIZER VACCINE FOR AGES 12 TO 15 BY NEXT WEEK (NYT)
  • RBA TWEAKS ECONOMIC ASSESSMENT, TO MAKE DECISION ON 3-YEAR YIELD TARGET ACGB IN JUL

BOND SUMMARY: Narrow Ranges, RBA Has Little Overall Impact

T-Notes stuck to a very narrow 0-02+ range in Asia-Pac hours, with a lack of headline flow compounded by the observance of holidays in both Japan & China (the former keeps cash Tsys closed until London hours). The contract last deals -0-01+ at 132-09, at lows of the day, on very limited volume of ~28K. This comes after a rally on Monday, but the contract ultimately finished a little shy of best levels. Final durable goods and March's factory orders readings headline the local economic docket on Tuesday. Elsewhere, Fedspeak will come from Kaplan & Daly.

  • YM -1.5, XM +1.0. A more upbeat economic assessment from the RBA (better short-term GDP outlook, lower unemployment track and uptick in underlying inflation expectations) did little for the space, outside of applying some mild pressure, as the movement in the Bank's forecasts was more of a mark to market exercise given the recent dynamics in the local economy. The assessment came alongside the Bank leaving its broader monetary policy settings unchanged, as expected. The Bank revealed that "at its July meeting, the Board will consider whether to retain the April 2024 bond as the target bond for the 3-year yield target or to shift to the next maturity, the November 2024 bond. The Board is not considering a change to the target of 10 basis points." The Bank also stressed that "the Board is prepared to undertake further bond purchases to assist with progress towards the goals of full employment and inflation. The Board places a high priority on a return to full employment." The highlight of its priority in the final sentence of that passage is a new inclusion to the statement but isn't particularly shocking. The Bank concluded with "the Board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest." The final sentence previously read "the Board does not expect these conditions to be met until 2024 at the earliest." This tweak was likely a product of the aforementioned updated projections surrounding inflation and unemployment.

EQUITIES: Tech Sector Bears Brunt Of Selling

A mixed session with cash markets in Japan and mainland China closed for holidays. The Hang Seng has squeezed out some gains along with markets in Australia, while in Taiwan the Taiex is seeing its second day of heavy losses, and South Korean bourses also seeing selling. The tech sector is being hit particularly hard thanks to a sell off in the US yesterday. US futures are lower as the greenback gains, the Nasdaq bearing the brunt of the selling.

OIL: Crude Futures Hold Near Top Of Range

Oil is slightly higher on Tuesday; WTI last up $0.05 from settlement levels at $64.54, while Brent is up $0.05 at $67.61. Crude futures have moved in a narrow range so far during the session after rising into the US morning as the greenback weakened yesterday. Markets are hoping for improved demand on the back easing restrictions for travelers in Europe and several states in the US.

GOLD: $1,800/oz Still Holding

The combination of a softer DXY and lower U.S. real yields put a bid under bullion on Monday, although the DXY's bounce from Monday's lows and continued uptick in Asia-Pac hours has prevented bullion from challenging $1,800/oz overnight, pinning spot to the $1,790/oz area during Asia-Pac hours. A break through yesterday's high ($1,798/oz) and $1,800/oz would open the path to the Feb 25 high ($1,805.7/oz).

FOREX: USD Outperforms, AUD Knee-Jerks Higher Post-RBA

Another holiday-thinned Asia-Pac session amid market closures in Japan & China saw G10 FX crosses stick to familiar ranges. The latest monetary policy decision from the RBA provided the main point of note, but reaction in the AUD was limited to a marginal knee-jerk higher. The Reserve Bank left its policy settings unchanged and revised its growth forecasts higher.

  • The greenback topped the G10 pile, with DXY gradually chewing into yesterday's losses, as all three main e-mini contracts faltered.
  • A wider cautious feel was evident through the bulk of the session, limiting commodity-tied FX. CAD bucked the trend and firmed despite marginally softer oil prices, while CHF was among the worst G10 performers.
  • U.S. trade balance, durable goods orders & factory orders, Canadian trade balance & building permits as well as comments from Fed's Kaplan & Daly, BoC's Macklem & ECB's Villeroy take focus from here.

FOREX OPTIONS: Expiries for May04 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.2035-50(E1.0bln)
  • GBP/USD: $1.3800(Gbp896mln)
  • AUD/USD: $0.8000(A$1.1bln)
  • AUD/NZD: N$1.0855-65(A$2.0bln-AUD puts)

UP TODAY (Times GMT/Local)