S&P500 hits a fresh record intra-day high and has registered near 10% gains in the quarter outstripping other indices. US Treasury Secretary wants to avoid longer end treasury supply. US Treasury yields decline and the curve flattens

US equities are ending the month on a positive footing with the S&P trading to a fresh intra-day record high. Investor sentiment has been underpinned by signs of progress on trade negotiations and the prospect of easier policy monetary policy from the Federal Reserve. Bloomberg reported that the European Union is prepared to accept a trade deal, that includes a universal 10% tariff on most exports, with some key exemptions. The S&P has gained close to 10% in the June quarter outperforming the Euro Stoxx, which has risen less than 2%, and other major global indices.

In currency markets, the US dollar remained heavy with the dollar index (DXY) falling to fresh multi-year lows. The DXY, has fallen more than 10% in 2025, which is the worst start to the year in several decades. The Canadian dollar advanced after policy makers rescinded the digital services tax to defuse US trade threats. Meanwhile the AUD and NZD have been the best performing G10 currencies to start the week. NZD/USD traded to a fresh 2025 high near 0.6090 overnight. The NZD has gained against the yen and sterling and is little changed on the other major crosses.

US treasuries rallied with flattening bias. Yields are 2-5bp lower across the curve with month end index extensions contributing to demand. 10-year yields declined 5bp to 4.23% and are at the lowest level since the beginning of May. The longer end of the curve was supported by comments by Treasury Secretary Bessent who said it wouldn’t make sense for the government to increase longer maturity treasury supply given where yields are.

German CPI unexpectedly eased to a 2.0% annual rate, which was below consensus estimates for a 2.2% increase. Regional European data has been mixed but are broadly consistent with inflation in the Eurozone settling near the ECB’s 2% target. European bond markets were little changed. 10-year bunds closed 2bp higher at 2.60%.

The official PMIs in China printed close to expectations. The manufacturing index remains marginally below 50 and notably captures the first full month after the US-China trade reset. Manufacturing production activities accelerated, and market demand improved according to the statistics agency. The services PMI edged higher to 50.5.

NZ filled jobs were weak in May. There was a modest 0.1% increase in the month, while the April reading was revised down to -0.3%. Jobs declined 0.2% in the June quarter and remain near the lowest level in two years. This suggests further upward pressure on the unemployment rate. Separately the activity indicator within the ANZ survey increased to 40.9 from 34.8 while inflation expectations were steady at 2.71%.

NZ fixed income yields moved modestly higher in the local session yesterday with the curve steepening. 2-year swap rates increased 1bp to 3.19% while 10-year rates closed at 4.08%, 3bp higher. The market looks ahead to key domestic economic data and the likely launch of the NZGB May-2031 tap syndication today. Pay side flow in swaps can be expected from bank balance sheets, who are expected to have solid demand, in the syndication.

Yields were 1-2bp higher across the NZ government curve with 10-year bonds closing at 4.59%. Australian 10-year government bond futures are close to 2bp lower since the local close yesterday suggesting a limited directional bias on the NZ open.

The Quarterly Survey of Business Opinion is the key domestic release today and is the final piece of first-tier economic data, ahead of the RBNZ Monetary Policy Review on July 9. Building permits for May are also scheduled. Preliminary CPI data for the Eurozone will be monitored. A modest uptick to 2% is expected in June, up from 1.9% in the previous month. The focus in the US will be the manufacturing ISM and JOLTS job openings report.