AUSSIE BONDS: ACGB Issuance Program: Budget 2026-27

NZGBs are 5-6bps cheaper with US tsy 10-year futures sharply opening weaker in today’s Asia-Pac session. 

• Risk sentiment is firmly weaker in early Monday dealings, with oil prices higher. This follows the failed talks between US and Iran officials in Pakistan over the weekend and then US President Trump's subsequent announcement of a naval blockade of the Strait of Hormuz (which will commence 10am US ET).
• The weakening trend in US tsys began last Friday after an Iranian parliament speaker posted on X two negotiation prerequisites have not been implemented yet: Lebanon ceasefire and the "release of blocked assets". Pres Trump followed up with announcement that US warships are "being reloaded if Iran peace talks fail".
• Bloomberg - "RBNZ's Breman Says Spare Capacity in Economy May Limit Inflation. New Zealand's economy has spare capacity which is acting to contain medium-term inflation pressures for now. Also saying "if we see inflation one, two years out still being high, then we would act to prevent that from happening."
• Swap rates are 6bps higher.
• RBNZ-dated OIS pricing is 1-6bps firmer across meetings. 10bps of tightening is priced for May, while February 2027 assigns 98bps.
• The local calendar will see Net Migration tomorrow.

Bloomberg Finance LP

The USD/JPY range Friday night  was 158.94-159.37, Asia is currently trading around 159.85, +0.35%. The pair is back to testing the 160 area again as those quick to sell the USD on hopes of a resolution are forced to pare back some risk. On the day, the first support is toward 158.50-159.00 and the market will be eyeing a test above 160 again. Look for more Jaw-Boning as the pressure builds and if we break I will be watching to see if we get any follow through this time, as it has really struggled up here since early March, has someone has been capping the move ?

• “Sanae Takaichi told ruling party lawmakers she aims to have a timeline to offer a constitutional amendment by next year. The PM has pledged more assertive defense policies and pro-growth government spending.” - BBG
• CFTC Data up to 07/04/2026 shows Asset Managers turning meaningfully short Yen for the first time, -14297(Last -633). The Leveraged community added slightly to their shorts, –60210(Last -57183).
• Options : Close significant option expiries for NY cut, based on DTCC data: 158.00($1.89b), 159.50($780m), 160.00($1.12b). Upcoming Close Strikes : 158.00($1.07b April 15), 158.85($1.23b April 15) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 82 Points
• Data/Event : Money Stock M2/M3

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Headlines have crossed from the WSJ that US President Trump is weighing limited military strikes on Iran, aiming to break the deadlock after talks over the weekend failed to deliver a breakthrough (see this link for the full piece). US President Trump subsequently stated a naval blockade of the Strait Of Hormuz would be enacted. This will kick in from 10am US ET on Monday. 

• The WSJ notes: "President Trump and his advisers are considering resuming limited military strikes in Iran as a way to break a stalemate in peace talks. Trump could also resume a full-fledged bombing campaign, or seek a more temporary blockade while pressuring allies to take responsibility for a military escort mission".
• A resumption of military strikes and a likely military response from Iran will be further risk off for markets (all else equal, given the rally on the cease fire from last week).
• Markets have already traded with a clear risk off tone in the first part of Monday trade. US prices have spiked higher, up over 7%, while US equity futures are down over 1%.