CHINA: Bond Futures Lower 2-Yr Near Key Technical

US Tsy futures hold weaker across the board 10yr last at 112-16+, -05. We remain above the 50-day EMA support point (112-12+) for 10yr futures, which will be watch on any further extension lower. The Sep move through this support zone proved to be a false break. The US Tsy cash curve has had a steepening bias, +56.5bps last. Spill over from a sharp steepening in the cash JGB curve (after Takaichi surprised and won the LDP leadership battle). 

• Outside of government shutdown news, with seemingly little progress made over the weekend, focus will remain on what can be gleaned from private sector surveys/economy wide anecdotes. Focus later today may be on Trump administration government job lay offs.
• For US 10yr outright, we remain within recent ranges, last 4.14%, with broader 4.00-4.10% ranges holding. Buyers might re-emerge on any move back toward 4.20%, given on-going signs around labour market softness (with the Fed's Jefferson highlighting on Friday the jobs market is softening across a range of indicators) and how the Fed composition may change as we progress through 2026. Still, with elevated inflation pressures it is unlikely to be a sharp break lower on the downside, rather a steady grind.
• Looking ahead, there is no data scheduled or Fed speakers for Monday. Tuesday's Trade Balance & Import/Export data suspended due to the Gov shutdown. US Treasury supply kicks off Monday with $84B 13W & $75B 26W bill auctions (1130ET).  

The kiwi has outperformed the G10 today with NZDUSD up 0.1% to 0.5836, close to the intraday high at 0.5840, helped by stronger US equity futures even though the NZX was lower. The USD index is up 0.25%.

• While the RBNZ is unanimously expected to cut rates on Wednesday, analysts are split between 25bp and 50bp. The NZD OIS market has about a 50% chance of a 50bp move and around 62bp by year end.
• In contrast, the AUD OIS market has around a 50% chance of a 25bp rate cut by end-2025. This divergence has seen AUDNZD trend higher reaching 1.1418 on 30 September, when the RBA left rates unchanged. The pair has moved lower since then. Today it initially rose to 1.1351 but has range traded since then and is currently little changed at 1.1324.
• The S&P e-mini is up 0.3% and Nikkei +4.5% but NZX down 0.4%. A number of Asian markets are closed today with thin trading in Australia. Oil prices are higher with WTI +1.5% to $61.80/bbl. Copper is down 0.1%.
• The Fed’s Schmid speaks later on the economy and monetary policy, and also the ECB’s Lagarde, Lane and de Guindos appear. August euro area retail sales print.

Gold has traded above round-number resistance at $3900/oz for most of Monday’s APAC session and has also broken above resistance at $3909.4, a Fibonacci projection. Today’s rally has resulted in another record high being reached at $3926.61. Bullion is currently 1.0% higher at $3926.3 helped by the ongoing US government shutdown with no near-term resolution apparent and the uncertainty it creates around the economy. This is outweighing the stronger US dollar (BBDXY +0.3%) and unchanged yields.

• Gold has benefited from safe-haven flows from the government shutdown as it not only weighs on US activity but also delays key data releases. Both are likely to make monetary policy decisions difficult as the outlook is even less clear. The market has almost 50bp of easing priced in by end 2025. Another senate vote to resolve the impasse will be held Monday.
• The prospect of further US rate cuts as well as uncertainty around the government shutdown and Fed independence mean that gold continues to make new highs and approach $4000/oz.
• Silver is up 01.0% to $48.47 after a high of $48.38, above resistance at 48.232. It fell to $47.962 early in the session.
• The S&P e-mini is up 0.3% and Nikkei +4.5% but ASX down 0.2%. A number of Asian markets are closed today. Oil prices are higher with WTI +1.5% to $61.81/bbl. Copper is down 0.3%.
• The Fed’s Schmid speaks later on the economy and monetary policy, and also the ECB’s Lagarde, Lane and de Guindos appear. August euro area retail sales print.