US Housing & Consumer Confidence Sag

US treasury yields bounced on Tuesday as risk trades returned and the yen fell across the board. But soft economic data and a strong auction raised fresh concerns. The Australian dollar was the top performer while the yen lagged. The RBNZ decision is up next--but later than the usual time. Below is the week's video for Premium subscribers outlining the next possible steps after closing all of our index shorts.

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One of the big market questions is whether central banks will ease in the year ahead, specifically the Fed. The market is pricing in a 68% chance of a cut by year end. A better way to phrase the question might be: Is the economy weakening. Because with 2% growth the Fed isn't going to cut rates.

On that front, Tuesday's macro news were worrisome. US consumer confidence data from the Conference Board fell to 124.1 compared to 132.5 expected. That remains at an elevated level but it's trending in the wrong direction. At the same time, housing continues to be a drag with starts falling to 1162K in Feb from 1210K expected.

The bond market had attempted a solid bounce with yields up 5 bps across the curve but most of that was wiped out midway through the day in an extremely strong 2 year auction. The results underscore that real money is happy to receive 2.40% for two-years rather than rolling over cash rates.

Looking ahead, the RBNZ decision is at 0100 GMT. That's about 4 hours later than the usual time in a change that will put the announcement at a more-liquid time of day. The consensus is for no change from the 1.75% cash rate but there is a real possibility of dovish messaging.

The event to watch later in the day will be the indicative votes from UK parliament. They will include 16 different questions and aren't binding but could help break the deadlock. Or more likely, underscore the seemingly impossible divisions. Yet there was some fresh hope Tuesday with ERG members shifting toward May but that was countered by signs the DUP will is unwilling to compromise.