Global markets were generally confined to narrow ranges in the absence of first-tier economic data or other catalysts. After four days of consecutive gains, the S&P was little changed in early afternoon trade. Equities in Europe remained well supported with key indices extending recent gains to fresh record highs. The FTSE was up 0.5% matching the gains for the region wide Stoxx 600. Global bond yields are modestly higher while the US dollar index was little changed.
Boston Fed President Collins signalled that rates would need to remain at an elevated level, for longer than previously thought, to reduce price pressures. She described policy settings as ‘moderately restrictive’ and that slower growth is required to achieve the central bank’s 2% inflation target. The comments align with the recent tone from Fed officials and there was little market reaction.
US treasury yields traded modestly higher with the market absorbing US$42 billion of 10-year supply. The auction had a 1bp tail and investors now look ahead to the US$25 billion 30-year bond auction tomorrow. 10-year treasury yields are up 3bps to 4.49% with the front end little changed. European bonds closed higher in yield - 10-year bunds are up 4bps to 2.46%.
Bank of Japan (BoJ) Governor Ueda said he is carefully watching the impact of the weak yen on inflation and suggested large declines in the currency could bring forward the case for tighter BOJ monetary policy settings. This represents a change of tone and hints at greater coordination amongst policy makers to support the currency. However, the yen wasn’t impacted by the comments and USD/JPY is back above 155. Since trading below 152 on Friday following unconfirmed intervention by the finance ministry USD/JPY has moved steadily higher.
The US dollar was broadly stable in overnight trade. The Swedish krone fell against the euro after the Riksbank cut rates for the first time since 2016 and signalled the potential for two more cuts in the second half of 2024. Outside of the yen, other major currencies were stable. After dipping below 0.6000 in the local session yesterday, NZD/USD stabilised ahead of 0.5980 and has rebounded overnight. The NZD was broadly stable on the major crosses though NZD/JPY has continued to move higher, trading above 93.30, which is more than 2% above Friday’s low.
NZ fixed interest yields declined in the local session yesterday reflecting moves in offshore markets. 10-year government bond yields reached the lowest level in nearly a month, before closing down 5bps at 4.67%, albeit off the yield lows for the day. The yield curve flattened with front end bonds ending unchanged on the day. Bonds continued to outperform swaps - 10-year asset swap spreads are at the bottom end of 10-25bps range that has contained price action through 2024.
Australian 10-year bond futures are ~4bps higher in yield overnight, suggesting an upward bias for NZ yields on the open.
New Zealand Debt Management are tendering NZ$$500 million of nominal NZGBs today split across May-30 ($250m), May-32 ($225m) and May-41 ($25m). The May-41 maturity hasn’t been tendered since early March and it is the first time NZ$25 million of a nominal line has been tendered since 2009.
There is no domestic data today. Later this evening, the Bank of England (BoE) is unanimously expected to hold rates steady at 5.25%. It is likely to be another 8:1 split vote with one MPC member continuing to call for a rate cut. The BoE will release its inflation report containing updated economic projections. The market is pricing the first 25bps rate cut by August and about 55bps of easing by the end of the year.
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