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RESEARCH
Markets Today
16 March 2022
Events Round-Up The fall in oil prices this week has helped reduce break-
even inflation rates. The US 10-year BE rate is down 9bps
NZ: Perform. of services index, Feb: 48.6 vs. 46.0 prev. to 2.86%, but this has been offset by a lift in the real rate,
so the 10-year nominal Treasury yield remains relatively
CH: 1yr MT lending facility (%), Mar: 2.85 vs. 2.75 exp.
steady for the day at 2.14%, albeit down from the 2.17%
CH: Fixed assets invest. (y/y%), Jan-Feb: 12.2 vs. 5.0 exp. high reached during the Asian trading session. European
CH: Industrial production (y/y%), Jan-Feb: 7.5 vs. 4.0 exp. 10-year rates showed modest falls for day.
CH: Retail sales (y/y%), Jan-Feb: 6.7 vs. 3.0 exp.
The 2-year Treasury rate is down 2bps, its first fall in seven
UK: Payrolled employees change (k), Feb: 275 vs. 108 prev. trading days ahead of the next FOMC policy
UK: Unemployment rate (%), Jan: 3.9 vs. 4.0 exp. announcement due 7am NZ time tomorrow morning. A
25bps hike has been well guided by the Fed, including
GE: ZEW survey expectations, Mar: -39.3 vs. 5.0 exp.
Chair Powell, so that wouldn’t surprise. There will be
EZ: Industrial production (m/m%), Jan: 0.0 vs. 0.0 exp. interest in the Fed Fund projections, with the median
US: Empire manufacturing, Mar: -11.8 vs. 6.4 exp. number of hikes for this year expected to be around 5 (up
from 3), but below current market pricing of just under 7
US: PPI final demand (y/y%), Feb: 10.0 vs. 10.0 exp.
hikes. Key questions will be whether this is simply seen as
US: PPI ex food, energy (y/y%), Feb: 8.4 vs. 8.7 exp. a bringing forward of rate hikes from 2023/24, and
NZ: GDT auction price index (%): -0.9 vs. 5.1 prev. whether the policy rate will need to go higher than the
current neutral rate of 2.5% to tame medium-term
Good Morning inflation.
A further plunge in oil prices has helped support a recovery In key economic data released overnight, US annual PPI
in US equities. Anxiety in the bond market has settled for a inflation cracked the 10% mark for the first time this cycle,
day, with small changes in US Treasuries and European but the core measure was 0.3 percentage points weaker
rates pushing lower. Currency movements have been than expected at 8.4% y/y. The Empire State
modest, with the NZD showing a small gain overnight to manufacturing index fell into negative territory, to reach
0.6760, recovering the small loss seen during local trading minus 11.8, its lowest level in almost two years, indicative
hours. of some weaker economic momentum before the Fed
even begins to raise rates.
The key market movement overnight has been another
plunge in oil prices. Brent crude fell as low as USD97.50 In war developments, talks between Russian and Ukrainian
and is currently down 6% at USD100. The fall has been officials continued, with a Ukrainian negotiator tweeting
attributed to comments from Russia’s Foreign Minister that that talks were focused on the general outlines of a
that sanctions on his country won’t affect the Iranian settlement, a ceasefire, and the withdrawal of Russian
nuclear deal, which could revive the deal and bring Iranian troops. There remains some doubt whether agreement can
oil back onto global markets. In addition, traders note the be reached, but military experts are noting that the war
surge in COVID19 cases in China that is leading to from the Russian side is not going as planned and this
increasing lockdown restrictions across the country will might force Russia to negotiate. Ukraine President
temper demand for oil. Furthermore, some of the recent Zelensky reportedly told military officials that it won’t
surge in oil prices reflected speculators pushing prices become a member of NATO, “...we have heard for years
higher, rather than an actual shortage of oil, and the that the doors were open, but we also heard that we could
increased margins imposed by clearing houses has reduced not join. It’s a truth and it must be recognised”. Not ever
speculative behaviour and a closing of active positions. joining NATO would satisfy one of the Kremlin’s conditions
to end the war, but President Putin told EC President
Weaker oil prices have boosted sentiment for US equities, Michel that Ukraine “is not showing a serious attitude
with the S&P500 opening stronger and index currently up toward finding mutually acceptable solutions”.
1½% for the session. All sectors are in positive territory
apart from Energy. Currency movements over the past 24 hours have been
modest. Against market expectations, the PBoC didn’t trim
www.bnz.co.nz/research Page 116 March
Markets Today 2022
the 1-year medium lending facility rate, leaving it at 2.85% The NZ rates market continued to be pummelled by global
but instead injected a net 100 billion yuan into the forces, with the juicy yields on offer still not tempting
financial system. For a second day the PBoC also set the offshore investors to buy NZGBs or receive swaps, given
CNY reference rate at a weaker level than expected, the turbulent global backdrop. Rates rose significantly to
driving further yuan weakness. China activity data on fresh multi-year highs. The 2-year swap rate rose 7bps to
investment, retail sales and industrial production for the 3.08% while the 10-year rate rose 10bps to 3.38%. NZGB
January-February period were much stronger than yields rose 9-10bps across much of the curve, with the 10-
expected across the board, but analysts are sceptical that year rate closing at 3.13%.
economic momentum can improve against a backdrop of
rising COVID19 cases and lockdowns. In the day ahead, NZ’s current account deficit is expected
to widen further, to 5.6% of GDP. Media are reporting that
The CNY strengthened overnight after a WSJ report that today the government will announce a bringing forward of
Saudi Arabia is in active talks with Beijing to price some of the reopening of the border to tourists by a few months to
its oil sales to China in yuan, a move that would dent the early April for Australian and visa-waiver countries. This
USD’s dominance of the global petroleum market. Talks would give the economy a much-needed boost from Q2
with China over yuan-priced oil contracts have been off and help the services balance of the current account to
and on for six years but have accelerated this year over recover in due course.
unhappiness with US security commitments defend Saudi
Arabia and its withdrawal from Afghanistan. After recent volatility, including a surge in January, US
retail sales growth is expected to only show modest
After a soft trading session during local trading hours, not growth, below the rate of inflation. Canada CPI inflation
helped by CNY weakness, the NZD recovered overnight and data should lift to fresh heights, with the average of core
is currently flat from this time yesterday at 0.6760. When measures rising further away from target. As noted earlier,
focus turns to China and concerns develop, the AUD is the US FOMC policy update is released at 7am NZ time,
often affected more than the NZD and this has been the and we’ll hold off the next Markets Today report to
case this week, seeing NZD/AUD break just above 0.94, as capture the announcement.
the AUD languishes just below 0.72.
jason.k.wong@bnz.co.nz
The GDT auction price index fell by 0.9%, the first fall since
early January and after a massive upward run. Whole milk Coming Up
powder prices fell 2.1%, going against the grain of the lift
Period Cons. Prev. NZT
in futures prices since the previous auction on the SGX-
NZ Current a/c bal (ann, % of GDP) Q4 -5.6 -4.6 10:45
NZX, while skim milk powder prices rose 1.6%.
US Retail sales(m/m%) Feb 0.4 3.8 01:30
US Retail sales ex auto, gas (m/m%) Feb 0.5 3.8 01:30
GBP is modestly stronger at 1.3040. UK labour market data
CA CPI (y/y%) Feb 5.5 5.1 01:30
were stronger than expected, with payrolls of 275k in
CA CPI Core (avg, y/y%) Feb 3.4 3.2 01:30
February and the unemployment rate back down to a pre-
COVID level of 3.9%, data which can only encourage the US NAHB housing market index Mar 81 82 03:00
BoE to raise rates at its meeting later this week. US FOMC Fed Funds (%, upper) Mar 0.5 0.25 07:00
US Fed Chair holds post-FOMC press conference 07:30
Source: Bloomberg, BNZ
www.bnz.co.nz/research Page 216 March
Markets Today 2022
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 0.6762 +0.2 0.6729 0.6792 CHF 0.9418 +0.3 S&P 500 4,227 +1.3 6.5 Oil (Brent) 100.49 -6.1
AUD 0.7188 +0.0 0.7170 0.7227 SEK 9.630 +0.1 Dow 33,341 +1.2 1.2 Oil (WTI) 96.84 -6.0
EUR 1.0938 -0.0 1.0937 1.1020 NOK 9.010 -0.4 Nasdaq 12,808 +1.8 -4.8 Gold 1928.4 -1.7
GBP 1.3041 +0.3 1.3018 1.3089 HKD 7.828 -0.0 Stoxx 50 3,738 -0.1 -2.4 HRC steel 1125.0 +0.0
JPY 118.30 +0.1 117.70 118.36 CNY 6.371 +0.1 FTSE 7,176 -0.2 6.3 CRB 288.5 -2.3
CAD 1.2787 -0.3 SGD 1.367 -0.0 DAX 13,917 -0.1 -3.8 Wheat Chic. 1126.8 +5.3
NZD/AUD 0.9407 +0.2 IDR 14,327 -0.0 CAC 40 6,355 -0.2 5.3 Sugar 18.73 -2.0
NZD/EUR 0.6182 +0.3 THB 33.53 +0.2 Nikkei 25,346 +0.2 -15.3 Cotton 118.78 +0.0
NZD/GBP 0.5185 -0.1 KRW 1,243 +0.1 Shanghai 3,064 -5.0 -11.1 Coffee 211.2 -3.6
NZD/JPY 79.99 +0.3 TWD 28.58 +0.2 ASX 200 7,097 -0.7 4.0 WM powder 5095 -0.7
NZD/CAD 0.8647 -0.0 PHP 52.41 -0.1 NZX 50 11,802 -0.0 -7.0 Australian Futures
NZ TWI 73.32 +0.3 3 year bond 97.925 0.06
Interest Rates 10 year bond 97.44 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 0.25 0.88 2.07 2.23 USD 2.14 0.01 NZGB 5 1/2 04/15/23 2.17 0.06 1 year 2.56 0.01
AUD 0.10 0.15 1.72 2.78 AUD 2.52 0.07 NZGB 0 1/2 05/15/26 2.94 0.09 2 year 3.08 0.07
NZD 1.00 1.49 3.08 3.38 NZD 3.13 0.10 NZGB 0 1/4 05/15/28 3.04 0.10 5 year 3.30 0.08
EUR 0.00 0.06 0.28 1.03 GER 0.33 -0.04 NZGB 1 1/2 05/15/31 3.11 0.09 7 year 3.34 0.10
GBP 0.50 1.02 1.97 1.62 GBP 1.58 -0.02 NZGB 2 05/15/32 3.13 0.10 10 year 3.38 0.10
JPY -0.03 -0.01 0.08 0.30 JPY 0.21 0.01 NZGB 1 3/4 05/15/41 3.42 0.11 15 year 3.38 0.10
CAD 0.50 1.06 2.27 2.63 CAD 2.15 -0.01 NZGB 2 3/4 05/15/51 3.48 0.11
* 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 06:53
Source: Bloomberg
www.bnz.co.nz/research Page 316 March
Markets Today 2022
NZD exchange rates
16/03/2022 6:54 am Prev. NY close 0.69 NZD/USD - Last 7 days
USD 0.6762 0.6746
GBP 0.5185 0.5188
AUD 0.9407 0.9385 0.68
EUR 0.6182 0.6166
JPY 79.99 79.73 0.67
CAD 0.8647 0.8651
CHF 0.6368 0.6332
DKK 4.5991 4.5876 0.66
FJD 1.4320 1.4286 09-Mar 10-Mar 11-Mar 12-Mar 15-Mar 16-Mar
HKD 5.2934 5.2820
INR 51.80 51.65 NZD/AUD - Last 7 days
0.95
NOK 6.0924 6.1012
PKR 121.11 120.56
PHP 35.44 35.41 0.94
PGK 2.3810 2.3754
SEK 6.5121 6.4911
SGD 0.9240 0.9221 0.93
CNY 4.3078 4.2943
THB 22.67 22.52
0.92
TOP 1.5111 1.5085
VUV 76.38 75.58 09-Mar 10-Mar 11-Mar 12-Mar 15-Mar 16-Mar
WST 1.7433 1.7615
XPF 73.88 73.71 NZD/USD - Last 12 months
ZAR 10.2112 10.2055 0.74
0.72
0.70
0.68
NZD/USD Forward Points 0.66
BNZ buys NZD BNZ sells NZD
0.64
1 Month -2.73 -2.12
0.62
3 Months -11.74 -10.74
6 Months -29.25 -26.85 0.60
Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22
9 Months -48.87 -45.75
1 Year -66.58 -61.98
NZD/AUD - Last 12 months
0.98
NZD/AUD Forward points
BNZ buys NZD BNZ Sells NZD
0.96
1 Month -8.59 -7.09
3 Months -30.28 -28.31
0.94
6 Months -71.92 -67.26
9 Months -107.62 -102.10
1 Year -137.75 -129.39 0.92
0.90
Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22
www.bnz.co.nz/research Page 416 March Markets Today 2022 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 Ivan Colhoun Alan Oster Ray Attrill Skye Masters Global Head of Research Group Chief Economist Head of FX Strategy Head of Fixed Income Research +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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