Ella 
Global equity markets experienced a generally positive trend, buoyed by the absence of significant economic data or fresh catalysts. Investors turned their attention towards an upcoming speech by influential Federal Reserve Governor Christopher Waller. While the S&P initially saw gains, they later faded in early afternoon trade. Meanwhile, equity indices in Hong Kong and mainland China dipped, erasing gains made earlier in March as optimism surrounding policy-driven rallies waned. Concurrently, US treasuries saw a decline in yield, while yen volatility took center stage in currency markets.
The yen dipped to its lowest level against the US Dollar since 1990 during Asian trading, as interest rate differentials continued to exert pressure. USD/JPY surged to highs nearing 152, prompting verbal intervention from Japanese policymakers and raising the likelihood of actual intervention by Japanese authorities for the first time since 2022. Finance Minister Suzuki emphasized a commitment to taking bold action against excessive moves. Subsequently, the yen rebounded upon news of an emergency meeting convened by the Bank of Japan, the finance ministry, and the Financial Services Agency to address yen weakness.
US treasury yields saw a modest decline, with 2-year yields dropping 3 basis points to 4.56%, aligning with post-FOMC levels from the previous week. A parallel shift occurred across the yield curve, with 10-year treasury yields decreasing by 4 basis points to 4.19%. Despite the yield decrease, the US$43 billion 7-year auction witnessed robust demand, with bid-cover ratios reaching the highest levels since October, potentially influenced by quarter-end portfolio rebalancing flow.
In currency markets, the US dollar remained relatively stable amid yen volatility. EUR/USD traded within a narrow range despite a modest improvement in Eurozone economic confidence. Asian currencies felt the impact of the yen’s weakness, with NZD/USD testing lows below 0.5990 for 2024. However, the NZD staged a modest recovery and traded within a narrow range during the offshore session.
NZ fixed interest markets saw little change during the local session, with 10-year government bonds closing at 4.64%. Anticipation builds for the weekly tender, where New Zealand Debt Management plans to offer NZ$500 million of nominal NZGBs, with limited demand indicated by the absence of ultras for the third consecutive tender.
Australian 10-year bond futures reflected a downward bias for NZ yields, suggesting a potential decline on the open.
In New Zealand, the government’s Budget policy statement, released ahead of the May Budget, revealed few surprises. The Treasury revised down growth projections, leading to reduced tax revenue and forecasting a delayed return to surplus. The government aims to target a reduction in net core debt below 40 percent of GDP, with the borrowing program set to be updated alongside the Budget in May, potentially reflecting an upward revision given the Treasury’s revised outlook.
ANZ business confidence data release today will shed light on the sustainability of recent improvements. Additionally, Federal Governor Waller’s remarks on the economic outlook, scheduled for this morning (NZT), will be closely monitored despite occurring after the US market close, given their potential impact on markets.
