29 Jan 2015
ACGBs rally on rate cut speculation, RBNZ shifts to neutral – TDS
FXStreet (Barcelona) - The TD Securities Team shares the market performance during the Asian session, noting that central bank activity ruled the Asian trade with ACGBs rallying on RBA rate cut speculation, while RBNZ shifted to a neutral stance sending NZD/USD lower.
Key Quotes
“Plenty of Central bank activity overnight. First the Fed removed ’considerable time’ from its statement but signalled ’international developments’ as a key source of concern. Then market speculation intensified around the potential for the RBA to cut next week following a journalist article published during London hours yesterday strongly hinting of a Feb cut.”
“TD expects the RBA to adopt a dovish tone, and lay the ground work for a rate cut, but it is unlikely a cut will be delivered as soon as next week. The speculation drove a sharp rally in ACGBs, 3yrs down -17bps to 1.966% in yield and the 10yrs -12bps lower. NZGBs had similar outsized moves lower in yield as well after the RBNZ signalled a shift to neutral, dropping it’s December tightening bias, with 3yrs –10bps and the 10yrs –13bps.“
“Equity markets were weaker across the region, save for Australia, +0.3% on rate cut speculation, while Japan and China stocks were off a bit more than 1% and Indian stocks were off 0.5%.”
“There are no large moves in FX, the USD is +0.2%, thanks largely to the 0.6% decline in the CHF. The AUD is down 0.2% and trading at fresh multi year lows, currently at US$0.7865. Most other currencies are off 0.1%, with the NZD clearing below US$0.7300, the lowest levels since Mar 2011, while the Yen is at ¥117.70.”
“Commodities are mixed, copper is –1%, iron ore futures +1.2%, gold and oil are unchanged.”
Key Quotes
“Plenty of Central bank activity overnight. First the Fed removed ’considerable time’ from its statement but signalled ’international developments’ as a key source of concern. Then market speculation intensified around the potential for the RBA to cut next week following a journalist article published during London hours yesterday strongly hinting of a Feb cut.”
“TD expects the RBA to adopt a dovish tone, and lay the ground work for a rate cut, but it is unlikely a cut will be delivered as soon as next week. The speculation drove a sharp rally in ACGBs, 3yrs down -17bps to 1.966% in yield and the 10yrs -12bps lower. NZGBs had similar outsized moves lower in yield as well after the RBNZ signalled a shift to neutral, dropping it’s December tightening bias, with 3yrs –10bps and the 10yrs –13bps.“
“Equity markets were weaker across the region, save for Australia, +0.3% on rate cut speculation, while Japan and China stocks were off a bit more than 1% and Indian stocks were off 0.5%.”
“There are no large moves in FX, the USD is +0.2%, thanks largely to the 0.6% decline in the CHF. The AUD is down 0.2% and trading at fresh multi year lows, currently at US$0.7865. Most other currencies are off 0.1%, with the NZD clearing below US$0.7300, the lowest levels since Mar 2011, while the Yen is at ¥117.70.”
“Commodities are mixed, copper is –1%, iron ore futures +1.2%, gold and oil are unchanged.”