AUSSIE BONDS: AUCTION PREVIEW: ACGB Dec-35 Supply Due

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 136.03 @ 15:44 BST Oct 10
• SUP 1: 135.61 - Low Oct 08 
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

A bear threat in JGB futures remains present despite the intraday spike Monday. The contract pulled well off the intraday high, keeping the bias negative for now. The latest sell-off has also resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. Key short-term resistance has been defined at 137.30, the Sep 8 high.  

Aussie bond futures surged at the open, as from late Friday we saw a sharp risk off move in the US. Trump's tariff threat against China drove safe have demand for US Tsys. For Aussie 3yr and 10yr futures, key short term resistance remains intact though. 

• We sit away from best levels for Aussie futures, as softer language used by US officials today and by Trump this morning suggest scope for negotiations with China. US Tsys futures are down so far today, the 10yr off 5bps to 112-31.
• For 3yr futures in Australia we got to 96.495 earlier today, but now sit at 96.475, +7.5bps, while 10yr futures sit at 95.68, +6.5bps (earlier highs were at 95.7050). Near-term resistance to watch is 95.780, the Sep 12 high, while the 3yr future short-term resistance to watch is 96.615, the Sep 12 high.
• ACGB yields are around 6.5-7.5bps lower across the benchmarks, led slightly by the front end. The 3-10s curve was last around +80bps, holding within recent ranges.
• The AU-US 10yr spread is still threatening to break highs, last +26bps. A clean break above +30bps could see +40-45bps targeted for the spread, levels last seen in 2022. If US-China tensions don't de-escalate this spread may mean revert though, as Australian easing expectations could firm again if tariffs threaten the China growth outlook.
• The local data calendar is empty until tomorrow's Sep NAB business survey, along with the RBA policy minutes. 

Gold made up some of Thursday’s losses on Friday as risk appetite deteriorated with the US dollar (BBDXY -0.2%) and Treasury yields falling. This followed US President Trump’s threats to add 100% tariffs on China in response to tighter restrictions on rare earth exports. It rose 1% to $4017.79/oz after reaching $4022.92, still off Wednesday’s record high of $4059.31. Bullion started Monday lower at $4006.48.0, as Trump’s recent comments signal that trade tensions will ease at his meeting with China’s President Xi later in October. Gold is higher again now at around $4042.

• While gold’s bullish trend remains, it is in overbought territory and could be pressured by an improvement in risk sentiment. Initial support is at $3884.1, 6 October low.
• Silver rose 1.8% to $50.148 but has started Monday around $50.46. It reached a high of $51.123 during Friday’s European session, remaining below the record high at $51.235 from 9 October. $50.00 is a key psychological level.  
• Equities sold off with the S&P down 2.7% and Euro stoxx -1.7% but the S&P e-mini is currently up 0.9% following Trump’s better tone on China trade. Oil prices are higher today with WTI +1.3% to $59.65/bbl. Copper is up 2.5%.