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RESEARCH
Markets Today
19 April 2022
Events Round-Up the curve, with the 30-year rate up by around 15bps from
Thursday afternoon and approaching 3% for the first time
NZ: REINZ house sales (y/y%), Mar: -33.5 vs. -32.8 prev. since 2019. Assisting the move higher in bond yields has
been a 5% increase in oil prices over the past few sessions
NZ: Manufacturing PMI, Mar: 53.8 vs. 53.6 prev.
on news that Libya had shut its largest oil field. The US 10-
AU: Employment change (k), Mar: 17.9 vs. 30 exp. year breakeven inflation rate has rebounded to almost 3%.
AU: Unemployment rate (%), Mar: 4 vs. 3.9 exp.
New York Fed President Williams, whose views are seen as
EC: Deposit facility rate (%), Apr: -0.5 vs. -0.5 exp.
reasonably aligned with Chair Powell, said he thought a
US: Retail sales (m/m%), Mar: 0.5 vs. 0.6 exp. 50bps hike next month was “a very reasonable option”
US: Retail sales, control group (m/m%), Mar: -0.1 v 0.1 exp. considering the cash rate was still “very low.” The
comments cemented expectations the Fed will quicken the
US: University of Michigan consumer sentiment, Apr: 65.7
pace of rate hikes from next month, following in footsteps
vs. 59 exp.
of the RBNZ and Bank of Canada which both raised rates by
US: Empire manufacturing survey, Apr: 24.6 vs. 1 exp. 50bps last week. Fed Chair Powell has a chance to rubber
CH: 1-year lending rate (%), Apr: 2.85 vs. 2.75 exp. stamp a 50bps hike later this week; he speaks twice on
Thursday, just before the pre-meeting blackout period
CH: Reserve Ratio requirements, major banks (%), Apr:
starts. The market prices around 215bps of Fed rate hikes
11.25 vs. 11.5 prev.
by the end of the year which, if realised, would put it on
CH: GDP (q/q%), Q1: 1.3 vs. 0.7 exp. par with 1994 for the most aggressive pace of Fed
CH: GDP (y/y%), Q1: 4.8 vs. 4.2 exp. tightening over the past thirty years.
CH: Retail sales (y/y%), Q1: -3.5 vs. -3 exp.
The EUR has fallen to a two-year low, below 1.08, as the
CH: Industrial production (y/y%), Q1: 5 vs. 4 exp. ECB meeting on Thursday night failed to live up to the
CH: Fixed asset investment (y/y%, ytd), Q1: 9.3 vs. 8.4 exp. elevated market expectations. The ECB reaffirmed that QE
bond purchases would stop in Q3, disappointing investors
Good Morning who were looking for the ECB to set out a firm end date for
QE later this quarter. Rate hikes would be “gradual” and
The great global bond sell-off has resumed over the long take place “some time after” the end of bond purchases,
weekend, with the US 10-year rate hitting a fresh cycle which Lagarde reiterated could be anything from “a week
high of 2.88%. NY Fed President Williams has cemented to several months”. Lagarde flagged the upcoming
expectations for a 50bps hike next month by saying such a meeting in June meeting as a key decision point where the
move was “a very reasonable option” while oil prices have Governing Council will assess new economic forecasts and
increased sharply on supply concerns, adding to overlay an “element of judgement”. After the meeting,
inflationary concerns and boosting bond yields. The USD is Bloomberg reported that a consensus had emerged within
broadly stronger against a backdrop of higher Fed rate hike the Governing Council to start raising interest rates in Q3,
expectations and softer risk appetite. USD/JPY has likely in 25bps increments.
reached a new 20-year high, the EUR has fallen to a two-
year low after the ECB failed to live up to elevated market The market pared back ECB rate hike expectations as
expectations and the NZD has fallen back towards 0.67, its Lagarde failed to provide a firm timeframe around ending
lowest level in eight weeks. An interview with RBNZ QE. A rate hike in July is just less than 50% priced in now,
Governor Orr is released at 8am this morning. having been almost 70% priced before the meeting. The
market is fully pricing the first 25bps hike by September
After a few days of consolidation, the global bond sell off and a second 25bps hike by December, which would take
has picked up afresh following hawkish comments from NY the deposit rate back to 0% for the first time since 2014.
Fed President Williams (see below) and a further increase The market expects the ECB will likely, at its June meeting,
in oil prices. The US 10-year rate, which was trading announce an end to QE in July, setting up a September
between 2.65% and 2.70% on Thursday afternoon, has hike, although July could still be a plausible option for the
blasted up to a fresh cycle high of 2.88% (currently 2.86%). first hike if purchases came to an end at the start of the
The move higher in US rates has been fairly uniform across month. Unlike the US, European markets have been
www.bnz.co.nz/research Page 119 April 2022
Markets Today
closed over Easter. Thursday night saw the German 10- through to lower consumer spending as yet. Retail sales
year rate increase 8bps, to 0.84%, near its highest level were close to expectations in March although upward
since 2015, despite the pullback in near-term ECB rate hike revisions to prior months imply spending was strong
expectations. through Q1 (a 13% annualised increase in the control
group measure of retail sales). Meanwhile, the Empire
The USD is broadly stronger amidst a backdrop of rising manufacturing survey, based on firms in the New York
Fed rate hike expectations and softer risk appetite. area, was much stronger than expected, with the index
USD/JPY has continued to shadow US Treasury yields hitting its strongest level since the end of last year. In
higher, hitting a fresh 20-year high this morning, just below Australia, the unemployment rate stayed at 4% in March
127. BoJ Governor Kuroda called the depreciation in the (3.954% unrounded), its equal lowest rate since 1974.
JPY “very rapid”, although he has not yet signalled any
intention to shift away from the BoJ’s ultra-easy monetary Thursday saw a modest increase in NZ short-term rates
policy stance. The NZD, which briefly touched 0.69 after after their big post-RBNZ falls the previous day. The 2-year
the RBNZ MPR last week, has fallen to around 0.6725, its swap rate was 2bps higher on the day, finishing the week
lowest level in eight weeks. at 3.50%. The market is pricing a peak in the cash rate of
around 3.85%, well down on what it was before the MPR
Equity markets have come under pressure as bond yields but still well above the RBNZ’s most recent projections
have surged higher, with the S&P500 down around 1% (which showed a peak of 3.35%). Rates are likely to open
from Thursday morning’s close and the NASDAQ almost 2% sharply higher to start the week here, reflecting the big
lower. Trading volumes have been subdued over the long moves higher in global rates over the long weekend.
weekend. Higher bond yields impact equities because they
raise the discount rates that are used to value future cash NZ house prices continue to slide, with the REINZ house
flows. Higher bond yields also reflect growing price index falling 2.1% m/m in March. We expect this
expectations of significant monetary policy tightening by trend to continue and we’re pencilling in a 10%-15%
the Fed which is likely to slow growth and hence dent decline, with the risk being an even larger price correction.
corporate earnings. Corporate earnings season gets into Inflation and employment are front of mind at present, but
full gear this week with Johnson & Johnson, Tesla and house prices could start to draw the market’s attention
Netflix among the big names reporting. later this year, especially if inflation does start to
moderate.
Chinese GDP surprised on the upside in Q1, with growth
increasing 1.3% over the quarter (4.8% y/y) compared to An interview with RBNZ Governor Orr, titled ‘Governor
the 0.7% consensus. Of course, the data largely predate Talk: New Zealand Tackling Inflation during Uncertain
the imposition of more stringent Covid restrictions, with an Times’ will be released at 8am this morning. The NZ
estimated ~370m people in China are now in full or partial Performance Services Index (PSI) is also released this
lockdown, amounting to around 40% of the country’s GDP. morning. The index has been stuck below 50 for seven
Economists think China is unlikely to reach its 5.5% GDP consecutive months, highlighting the challenges the
growth target for this year, unless it can do what no other services sector has been facing amidst Covid restrictions
country has done – eliminate Omicron before too much and the latest Omicron wave. The key data release for the
economic damage is inflicted. While policymakers have domestic market this week though is CPI on Thursday. We
signalled more support for the economy, the response to are looking for headline CPI to increase 2% q/q which
date has been relatively cautious. The PBOC kept its 1- would take the annual rate to 7.1%. At the April MPR, the
year interest rate unchanged on Friday, against market RBNZ said it was expecting headline inflation to peak
expectations for a 10bps rate cut, while reserve ratio around 7% in the first half of the year.
requirements for major banks were reduced by just 25bps,
the smallest reduction on record. The PBOC has focused nick.smyth@bnz.co.nz
on targeted measures, such as providing banks with
funding to lend to sectors which have been hard hit by Coming Up
Covid restrictions.
Period Cons. Prev. NZT
NZ RBNZ Governor Orr interview with IMF 08:00
There have been a lot of economic data released over the NZ Performance Services Index (PSI) Mar 48.6 10:30
past few days, as the data column at the top of this note AU RBA-Minutes 13:30
illustrates. The University of Michigan consumer US Building Permits (k) Mar 1839 1859 00:30
confidence index rebounded from a 10-year low in April, US Housing Starts (k) Mar 1738 1769 00:30
with the sharp increase in stock prices from mid-March US Fed’s Evans Speaks to Economic Club of New York 04:05
likely boosting sentiment. Confidence remains at very Source: Bloomberg, BNZ
subdued levels but this doesn’t appear to have translated
www.bnz.co.nz/research Page 219 April 2022
Markets Today
Foreign Exchange Equities Commodities**
Indicative overnight ranges (*) Other FX Major Indices Price
Last % Day Low High Last % Day Last % Day % Year Last Net Day
NZD 0.6726 -0.6 0.6715 0.6744 CHF 0.9444 +0.1 S&P 500 4,404 +0.2 5.6 Oil (Brent) 113.20 +1.4
AUD 0.7351 -0.6 0.7346 0.7379 SEK 9.596 +0.2 Dow 34,491 +0.1 1.3 Oil (WTI) 108.14 +1.1
EUR 1.0784 -0.2 1.0770 1.0814 NOK 8.860 +0.5 Nasdaq 13,362 +0.1 -4.8 Gold 1981.3 +0.5
GBP 1.3010 -0.4 1.3005 1.3045 HKD 7.843 -0.0 Stoxx 50 3,849 +0.5 -3.6 HRC steel 1480.0 +0.1
JPY 126.95 +0.4 126.44 126.97 CNY 6.367 -0.1 FTSE 7,616 +0.5 9.1 CRB 311.9 +1.2
CAD 1.2617 +0.1 SGD 1.362 +0.4 DAX 14,164 +0.6 -7.2 Wheat Chic. 1128.3 +2.2
NZD/AUD 0.9150 +0.1 IDR 14,356 -0.2 CAC 40 6,589 +0.7 5.7 Sugar 20.26 +1.0
NZD/EUR 0.6237 -0.3 THB 33.72 +0.3 Nikkei 26,800 -1.1 -9.7 Cotton 144.74 +2.0
NZD/GBP 0.5170 -0.2 KRW 1,234 +0.3 Shanghai 3,196 -0.5 -8.1 Coffee 223.8 +0.2
NZD/JPY 85.39 -0.1 TWD 29.23 +0.3 ASX 200 7,523 +0.6 6.6 WM powder 4250 -0.2
NZD/CAD 0.8486 -0.5 PHP 52.26 +0.2 NZX 50 11,892 +0.1 -5.9 Australian Futures
NZ TWI 73.06 -0.3 3 year bond 97.405 0.09
Interest Rates 10 year bond 96.92 0.02
Rates Swap Yields Benchmark 10 Yr Bonds NZ Government Bonds NZ Swap Yields
Cash 3Mth 2 Yr 10 Yr Last Net Day Last Last
USD 0.50 1.06 2.72 2.90 USD 2.85 0.03 NZGB 5 1/2 04/15/23 2.54 0.03 1 year 2.99 0.02
AUD 0.10 0.33 2.35 3.29 AUD 2.97 -0.10 NZGB 0 1/2 05/15/26 3.30 -0.03 2 year 3.50 0.02
NZD 1.50 1.79 3.50 3.67 NZD 3.42 -0.04 NZGB 0 1/4 05/15/28 3.36 -0.04 5 year 3.64 0.00
EUR 0.00 0.06 0.72 1.57 GER 0.84 0.08 NZGB 1 1/2 05/15/31 3.39 -0.05 7 year 3.65 -0.02
GBP 0.75 1.12 2.17 1.94 GBP 1.89 0.09 NZGB 2 05/15/32 3.42 -0.04 10 year 3.67 -0.04
JPY -0.03 -0.02 0.09 0.42 JPY 0.25 0.00 NZGB 1 3/4 05/15/41 3.52 -0.04 15 year 3.63 -0.04
CAD 1.00 1.52 2.85 3.23 CAD 2.79 0.03 NZGB 2 3/4 05/15/51 3.57 -0.04
* These are indicative ranges from 5pm NZT; please confirm rates with your BNZ dealer
** All near futures contracts, except CRB. Metals prices are CME.
Rates are as of: NZT 06:56
Source: Bloomberg
www.bnz.co.nz/research Page 319 April 2022
Markets Today
NZD exchange rates
19/04/2022 6:56 a.m. Prev. NY close 0.70 NZD/USD - Last 7 days
USD 0.6726 0.6764
GBP 0.5170 0.5179 0.69
AUD 0.9150 0.9147
EUR 0.6237 0.6257 0.68
JPY 85.39 85.54
CAD 0.8486 0.8529 0.67
CHF 0.6352 0.6379
DKK 4.6398 4.6544 0.66
FJD 1.4136 1.4303 12-Apr 13-Apr 14-Apr 15-Apr 16-Apr 19-Apr
HKD 5.2749 5.3057
INR 51.29 51.53 NZD/AUD - Last 7 days
0.93
NOK 5.9590 5.9635
PKR 122.78 122.99
PHP 35.16 35.20 0.92
PGK 2.3387 2.3817
SEK 6.4539 6.4767
SGD 0.9160 0.9179 0.91
CNY 4.2825 4.3097
THB 22.64 22.71
0.90
TOP 1.4923 1.5034
VUV 74.93 75.32 12-Apr 13-Apr 14-Apr 15-Apr 16-Apr 19-Apr
WST 1.7222 1.7361
XPF 74.08 74.43 NZD/USD - Last 12 months
ZAR 9.8909 9.8926 0.74
0.72
0.70
0.68
NZD/USD Forward Points 0.66
BNZ buys NZD BNZ sells NZD
0.64
1 Month -3.32 -2.54
0.62
3 Months -10.82 -9.84
6 Months -24.91 -23.41 0.60
Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22
9 Months -38.73 -35.88
1 Year -49.93 -46.94
NZD/AUD - Last 12 months
0.98
NZD/AUD Forward points
BNZ buys NZD BNZ Sells NZD
0.96
1 Month -8.74 -7.09
3 Months -30.52 -28.68
0.94
6 Months -63.98 -60.68
9 Months -90.48 -85.32
1 Year -109.43 -103.36 0.92
0.90
Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22
www.bnz.co.nz/research Page 419 April 2022 Markets Today Contact Details BNZ Research Stephen Toplis Craig Ebert Doug Steel Jason Wong Nick Smyth Head of Research Senior Economist Senior Economist Senior Markets Strategist Senior Interest Rates Strategist +64 4 474 6905 +64 4 474 6799 +64 4 474 6923 +64 4 924 7652 +64 4 924 7653 Main Offices Wellington Auckland Christchurch Level 4, Spark Central 80 Queen Street 111 Cashel Street 42-52 Willis Street Private Bag 92208 Christchurch 8011 Private Bag 39806 Auckland 1142 New Zealand Wellington Mail Centre New Zealand Toll Free: 0800 854 854 Lower Hutt 5045 Toll Free: 0800 283 269 New Zealand Toll Free: 0800 283 269 National Australia Bank Limited Ivan Colhoun Alan Oster Ray Attrill Skye Masters Global Head of Research Group Chief Economist Head of FX Strategy Head of Markets Strategy +61 2 9237 1836 +61 3 8634 2927 +61 2 9237 1848 +61 2 9295 1196 Wellington New York Foreign Exchange +800 642 222 Foreign Exchange +1 212 916 9631 Fixed Income/Derivatives +800 283 269 Fixed Income/Derivatives +1 212 916 9677 Sydney Hong Kong Foreign Exchange +61 2 9295 1100 Foreign Exchange +85 2 2526 5891 Fixed Income/Derivatives +61 2 9295 1166 Fixed Income/Derivatives +85 2 2526 5891 London Foreign Exchange +44 20 7796 3091 Fixed Income/Derivatives +44 20 7796 4761 This document has been produced by Bank of New Zealand (BNZ). BNZ is a registered bank in New Zealand and is only authorised to offer products and services to customers in New Zealand. Analyst Disclaimer: The Information accurately reflects the personal views of the author(s) about the securities, issuers and other subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author(s) do not necessarily reflect the views of the NAB Group. No part of the compensation of the author(s) was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. Research analysts responsible for this report receive compensation based upon, among other factors, the overall profitability of the Global Markets Division of NAB. NAB maintains an effective information barrier between the research analysts and its private side operations. Private side functions are physically segregated from the research analysts and have no control over their remuneration or budget. The research functions do not report directly or indirectly to any private side function. The Research analyst might have received help from the issuer subject in the research report. New Zealand: This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. To the extent that any information or recommendations in this publication constitute financial advice, they do not take into account any person’s particular financial situation or goals. Bank of New Zealand strongly recommends readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. National Australia Bank Limited is not a registered bank in New Zealand. USA: If this document is distributed in the United States, such distribution is by nabSecurities, LLC. This document is not intended as an offer or solicitation for the purchase or sale of any securities, financial instrument or product or to provide financial services. It is not the intention of nabSecurities to create legal relations on the basis of information provided herein. www.bnz.co.nz/research Page 5
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