US TSY FLOWS: BLOCK BUY TUU6 / SELL UXYU6

The AUD/USD has had a range today of 0.7179-0.7242 in the Asia- Pac session, it is currently trading around 0.7235,+0.75%. The AUD surged higher in Asia as Trump’s statement that “Great progress has been made on the final agreement with Iran” added to the already buoyant risk-backdrop. I am surprised the market still reacts like this to everything Trump says, and would err on the side of caution on anything coming out of his mouth. The market has been caught so many times chasing Trump's windmills, he will of course be right one day. On the day, while the price is looking to challenge the 0.7225-0.7250 I remain skeptical as to the reasons. The first support is toward 0.7150 and then 0.7080-0.7100, the bulls will be looking for a sustained break back above the 0.7200-0.7300 resistance which would imply another extension higher.

• “TRUMP:GREAT PROGRESS HAS BEEN MADE ON FINAL AGREEMENT WITH IRAN" - BBG 
• MNI AU -  RBA-Dated OIS Holding Post-CPI Softening After Yesterday’s RBA Decision : RBA-dated OIS pricing is flat to 13bps softer across meetings versus pre-CPI levels, with late 2026 / early 2027 leading.
• "NAB: NOW SEES RBA HIKE IN JUNE, TAKING CASH RATE TO 4.60%" - BBG
• "AUSTRALIA PM ALBANESE: TO LIFT MINIMUM STOCKPILES ON EVERY TYPE OF FUEL BY AROUND 10 DAYS. TO ESTABLISH PERMANENT GOVERNMENT FUEL SECURITY RESERVE.” 
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7120(AUD315m). Upcoming Close Strikes : 0.7050(AUD1.34b May 7), 0.7200(AUD1.24b May 7), 0.7250(AUD1.94b May 7) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 54 Points

Fig 1: AUD/USD spot Weekly Chart

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

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• In an 8-1 vote the RBA hiked rates 25bp to 4.35% as was widely expected. This was the third consecutive increase and brought rates back to where they were before 2025’s easing.
• The RBA believes that policy is now a “bit restrictive” but that tightening has given it “space” to monitor risks in both directions to growth, employment and inflation. Thus it could pause in June.
• While modestly softer than pre-RBA levels, OIS pricing continues to show tightening across all meetings, with the probability of a 25bp hike rising from 26% for June to 107% by September and 144% by December 2026.
• The May hike was driven by “indications” that higher fuel prices would likely have “second-round effects on prices for goods and services more broadly” and that the Iran War is already “adding to inflation”. 

• In their first day back post May day break, CGB's are posting losses following the withdrawal of liquidity by the PBOC and ahead of a big auction schedule.  
• China's central bank is likely to guide liquidity conditions from an "extremely loose" stance in April toward a "neutral with a mild easing bias" setting in the coming months, according to the Shanghai Securities News: https://paper.cnstock.com/html/2026-05/06/content_2212810.htm
• The CGB 10-Yr has backed up +1.5bps to 1.76% as bond futures tick lower.  
• The 10-Yr bond future is down -.09 to 108.495 and break below the 20-day EMA of 108.54.  Below is the 50-day EMA at 108.41.
• Friday sees a significant uptick in issuance with CNY85bn 2056, CNY170bn 2028 plus 1-Yr and 20-Yr auctions for unspecified amounts