Market price action has been limited by a lack of newsflow. Currency movements has been remarkably well contained, with the NZD steady just over the 0.60 mark. Global equity markets show small gains while global rates also show only small movements.
It has been another uneventful trading session with no catalysts to significantly impact the market. US data releases were mixed, with conflicting evidence on the state of the economy.
The Conference Board measure of US consumer confidence was steady in March, after a downwardly revised February, leaving it a little softer than market expectations, driven by the expectations component. The latter fell to 73.8, the lowest since October. Interestingly the labour market variables showed some tightening in the market, with the difference between consumers saying jobs were currently plentiful less those saying jobs were hard to get, rising to an eight-month high.
The durables good orders report was also a mixed bag, with headline orders up 1.4% m/m, but with downward revisions, the ex-transportation measure rising slightly more than expected at 0.5% m/m, but core shipments that feed into GDP falling 0.4% m/m. Not surprisingly, the market reaction to this hodge podge of figures has been limited. The US 10-year Treasury yield is a touch higher from the NZ close, currently trading at 4.24%, while the 2-year is down slightly at 4.60%.
The BoE’s Mann, one of the most hawkish members on the MPC, said she switched her vote from a hike to on-hold because the labour market is softening, consumers are spending less on discretionary services, and the market was pricing in fewer cuts than earlier in the year. However, she said the market was still pricing in too many cuts this year, making her less inclined to vote for a cut, with market pricing already feeding into lower borrowing rates. She pushed back the idea that the BoE could be easing ahead of the Fed or ECB, given the stronger comparative inflation dynamics in the UK.
Her comments had little impact on the market, and net currency movements for the day have been insignificant, all contained to within plus or minus 0.1% against the USD for the key majors we follow. The NZD is tracking just over the 0.60 mark. Yesterday, the PBoC offered another strong CNY reference rate fixing to help contain speculation in the market and this helped support the NZD and AUD. The AUD is flat around 0.6540 and NZD/AUD is slightly higher at 0.9195.
Global forces sent NZ rates higher yesterday, while the bond market was also impacted by the announcement by NZDM of the syndication panel for a new 2035 nominal bond to be issued. We expect this to be launched just after Easter. The news resulted in NZGBs underperforming, as the market made room for the new issue. NZGB yields were 4-7bps higher with a steeper curve, and with swap yields up 2-4bps by comparison.
In the day ahead NZ consumer confidence data are released, ahead of the government’s annual Budget Policy Statement. This Statement will contain new Treasury economic forecasts, which will make for grim reading, raising the prospect of larger fiscal deficits ahead and more borrowing. Australian monthly CPI data are expected to show a small lift in inflation in February, from January, up 3.5% y/y according to the consensus.
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