US TSYS: Cash Open

Gold prices have started the week’s trading lower at $3327.7/oz as geopolitical risks around Ukraine at this stage appear to be easing. US President Trump meets with Ukraine’s President Zelenskyy and other European leaders on Monday to discuss the results of his talks with Russia’s President Putin, which the market is now focusing on. Bullion range traded on Friday ahead of the Putin-Trump meeting to be down 1.8% last week pressured by a significantly higher US PPI.

• Russia is apparently offering to hold its frontlines in Kherson and Zaporizhzhia in exchange for the Donbas. US special envoy Witkoff said that the US/European security guarantee could “effectively offer Article-5 like language” (NATO), as reported by the BBC. Ukraine has to hold a referendum though to agree to changes to its territory.
• Gold has been range trading and is up only 1.5% this month. It is currently below the 50-day EMA at $3334.8 and a sustained break would signal scope for a deeper retracement. The bear trigger is at $3248.7. Initial resistance is at $3409.2, 8 August high.
• Silver is down 0.3% to $37.875 so far today after being little changed on Friday. It was almost a percent lower last week but still up 3.5% in August. It continues to trade between initial support at $36.216 and resistance at $39.655.
• The USD index was down 0.25% and US yields were slightly higher. Equities were mixed with the S&P down 0.3% but Euro stoxx up 0.3% and today the S&P e-mini is +0.1%. Oil prices were lower with WTI -1.3% to $63.14/bbl. Copper rose 0.2%.

In post-Tokyo trade on Friday, JGB futures closed weaker, -32 compared to settlement levels, after US tsys bear-steepened, with yields 2-5bps higher.

• While July retail sales appeared solid in our view (and led to a slight upgrade to the Atlanta Fed's GDPNow est for Q3), the August prelim UofM survey was decidedly stagflationary with weaker sentiment and higher inflation expectations, while industrial production was uninspiring and import price inflation was a little firmer than expected despite lower revisions.
• This week's US calendar includes residential sector data (housing starts, homebuilder sentiment, existing home sales) and flash August PMI data as well as a few Fed speakers (notably Waller and Bowman) ahead of Friday’s keynote speech by Fed Chair Powell as part of the annual Jackson Hole symposium Aug 21-23.
• (Bloomberg) -- "Japan, the European Union, and South Korea are waiting for the US to implement concessions on tariffs, with Japan's chief trade negotiator Ryosei Akazawa saying "the bleeding hasn't stopped" for the country's car industry."
• "Japan plans to tighten oversight of foreign workers with specialist expertise, after reports some are engaged in work not permitted by their visas, Kyodo said." – BBG
• Today, the local calendar will see the Tertiary Industry Index.

ACGBs (YM -3.5 & XM -4.5) are weaker after US tsys bear-steepened on Friday, with yields 2-5bps higher.

• There was no particular event or headline that stood out, but recent whiffs of stagflation (following on from Thursday's hot producer price report) and follow-through from European long-end weakness (partly on fiscal concerns) appeared to weigh.
• While July retail sales appeared solid in our view (and led to a slight upgrade to the Atlanta Fed's GDPNow est for Q3), the August prelim UofM survey was decidedly stagflationary with weaker sentiment and higher inflation expectations, while industrial production was uninspiring and import price inflation was a little firmer than expected despite lower revisions.
• Cash ACGBs are 3-4bps with the AU-US 10-year yield differential at -5bps.
• The bills are -1 to -4, with the strip steeper.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in September is given a 28% probability, with a cumulative 36 bps of easing priced by year-end.
• The local calendar will be empty today, ahead of Westpac Consumer Confidence tomorrow.
• This week, the AOFM plans to sell A$1500mn of the 1.25% 21 May 2032 bond on Wednesday and A$300mn of the 4.75% 21 June 2054 bond on Friday.