AUD: A$ Mid-Range Performer, AUDUSD Little Changed

The NZD/USD had a range overnight of 0.5890 - 0.5915, Asia is trading around 0.5900. The NZD is consolidating around 0.5900. The NZD has bounced off its support toward 0.5800, sellers should continue to be around looking to fade the move back towards the 0.5950/0.6000 area initially. Should the USD break lower and gain momentum this would complicate this trade and then it would be prudent to rotate the NZD shorts into the crosses. US Futures have opened slightly firmer this morning, E-minis +0.15%, NQU5 +0.15%. 

• MNI BRIEF: SCO Development Bank To Boost Infrastructure - FM. The establishment of a Shanghai Cooperation Organisation Development Bank will help boost infrastructure and socio-economic development amongst member states and the wider region, China’s Foreign Minister Wang Yi told reports on Monday. The establishment of an energy cooperation platform will be open to all SCO members and will support sustainable development to the region, Wang added.
• Bloomberg - “Dollar Vulnerable to Slide With Fed Rate-Cut on Menu. The US dollar is likely to sag as expectations build for Friday’s payrolls data to cement bets on Federal Reserve rate cuts. Uncertainty about the central bank’s independence, and about the legal standing for tariffs, add to the reasons for a weaker greenback.”
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5700(NZD500m). Upcoming Close Strikes : 0.5700(NZD384m Sept 3) - BBG
• CFTC Data of last week shows Asset Managers added slightly to their new short position in the NZD -4743(Last -3198), the Leveraged community have almost completely exited their short -225(Last -4004).
• Data: Terms Of Trade Index

Fig 1: NZD/USD Spot 2H Chart

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

NZGB yields are biased higher in the first part of Tuesday trade, led again by the back end. The 2yr NZGB yield was little changed and last near 2.965%, while the 10yr is up close to 2bps, tracking towards 4.38%. 

• US Treasury futures dealt mildly cheaper at the early close for Labor Day on Monday, after an unsurprisingly quiet session. Sell-off cues were taken from some mild weakness in EGBs on supply grounds. We have re-opened this morning with a negative bias, which may be aiding the NZGB yield backdrop.
• For 2yr NZGB, focus will remain on whether we can re-capture the 3% handle. Beyond this, pre-RBNZ highs were above 3.20%. For the 10yr yield we close to 4.50% in terms of pre RBNZ highs.
• The NZ 2yr swap rate is edging higher, last around 2.74%.
• Q2 terms of trade data are out today, which includes trade volumes, are released on Tuesday and expected to rise 1.9% q/q. 

TYZ5 reopens at 112-12, down 0-04 from closing levels in today’s Asia-Pac session.

• Overnight the TYZ5 contract had a range of 112-09+ - 112-13, closing around 112-11+ down 0-05. 
• US (MNI): Trump May Declare National Housing Emergency In Fall - Bessent. US Treasury Secretary Scott Bessent told the Washington Examiner that President Donald Trump may declare a 'national housing emergency' this fall to address rising house prices. The Washington Examiner notes that there hasn't been a national housing emergency declared since the 2008 recession.
• Bloomberg: “Wall Street will be bracing for a crucial stretch, with jobs numbers, inflation data and the Fed’s rate call all landing within the next three weeks, and swaps markets are pricing in roughly 90% odds that the Fed will cut them at this meeting.”
• 10-Year Yields continue to find supply toward the 4.20% area, which signals the range might continue to dominate. A break of the recent lows around 4.18% would bring the bottom of the range towards 4.10% back into focus.