Global equity markets are generally higher in the absence of economic data or fresh catalysts. Japanese policy makers huddle to seek plan to rescue the Yen

Global equity markets are generally higher, in the absence of economic data or fresh catalysts, with investors looking ahead to a speech by influential Federal Reserve Governor Christopher Waller. The S&P is marginally higher in early afternoon trade with earlier gains having faded. Equity indices in Hong Kong and mainland China fell, and have now erased gains for March, as optimism around the policy-driven rally fades. US treasuries moved lower in yield while yen volatility was the focus in currency markets.

The yen fell to its lowest level against the US Dollar since 1990 in Asian trade with interest rate differentials continuing to weigh. USD/JPY reached highs just below 152, which prompted a round of verbal intervention by Japanese policymakers and raised the probability of actual intervention by Japanese authorities, for the first time since 2022. Finance Minister Suzuki said ‘we will take bold action against excessive moves’. The yen subsequently rebounded on news of an emergency meeting between the Bank of Japan, the finance ministry, and the Financial Services Agency to discuss yen weakness.

US treasury yields drifted lower with 2-year yields down 3bps to 4.56%, which corresponds with levels reached in the aftermath of the FOMC last week. It was a largely parallel curve shift - 10-year treasury yields declined 4bps to 4.19%. The US$43 billion 7-year auction saw decent demand, despite the move lower in yields, with bid-cover the highest since October which was perhaps related to quarter-end portfolio rebalancing flow.

In currency markets the US dollar was broadly unchanged despite the volatility in the yen. EUR/USD was confined to a narrow range and looked past the modest improvement in Eurozone economic confidence. The contagion to Asian currencies from the weak yen, saw NZD/USD retest the 2024 lows sub-0.5990. The NZD has since recovered modestly and traded in a narrow range in the offshore session.

NZ fixed interest markets ended little changed in the local session yesterday. 10-year government bonds closed at 4.64%. The market looks ahead to the weekly tender today. New Zealand Debt Management will offer NZ$500 million of nominal NZGBs split across 20 Apr 2029 ($275m) and 15 May 2034 ($225m). For the third consecutive tender, there will be no ultras offered, suggesting limited demand being indicated by market participants, in this part of the curve.

Australian 10-year bond futures are ~4bps lower in yield overnight, suggesting a downward bias for NZ yields on the open.

The NZ Government’s Budget policy statement, prepared in advance of the Budget in May, provided few surprises. The Treasury has revised down its growth projections, which will reduce tax revenue, and has forecast a later return to a surplus. As part of its fiscal strategy, the government will target a reduction in net core debt below 40 percent of GDP. The borrowing programme will be updated alongside the Budget in May, with risks skewed towards an upward revision, given the Treasury’s revised growth and tax outlook.

ANZ business confidence is released today and will reveal if the recent improvement can be sustained. Federal Governor Waller will deliver remarks on the economic outlook this morning (NZT). His previous comments have been impactful for the markets, and will be closely monitored, albeit taking place after the US market close.