OIL: Crude Continues Trending Higher On Geopolitics

• MNI: UK AUG BRC SHOP PRICES +0.2% M/M, +0.9% Y/Y

The early bias in Aussie bond futures is modest weakness, in line with US Tsy futures softness from Monday trade. 10yr (XM) futures were last around 1.52bps lower, tracking at 95.675, while 3 yr futures (YM) were also down 1.5bps to 96.595. These shifts keep us within recent ranges. 

• In the cash government bond yield space, we are +1-1.5bps firmer in the first part of dealings, so slightly lagging the moves seen in US Tsy yields from Monday's session. US yields were 2-3bps firmer, led marginally by the front end. Treasuries opened weaker - scaling back a fair portion of Friday's post-Chair Powell speech in Jackson Hole that left the door open to a possible rate cut at the next FOMC. Liquidity was likely impacted with UK markets out. Treasury futures also maintained losses after higher than expected new home sales data.
• The 10yr Aussie bond yield sits just under 4.30%, while the 3yr is close to 3.40%.
• On the data front today, the focus is on the RBA Minutes from the August policy meeting. They will likely be monitored for further details on its concerns regarding lacklustre productivity growth, its view on the labour market and any discussion of the risks around its inflation outlook. The vote to ease was unanimous. 

The overnight night range was 147.10-147.94, Asia is currently trading around 147.75. USD/JPY grinded higher all day yesterday paring back just over 50% of the knee-jerk lower. The demand  towards 146.00 has been pretty solid all of July and August, keeping us for the most part in a 146.00-149.00 range. CFTC data for last week shows leveraged accounts again added to JPY shorts so the initial reaction to Powell would have been unwelcome and they would be breathing a little easier today as the support continues to look solid.

• Joseph Wang on X: “Good speech by Ueda on how Japan's aging demographics are driving up wages. Increasing participation rates and retiring at a later age have reached their limits. It looks like the theory that aging demographics is inflationary will be validated. https://t.co/YyW7JcMySw”
• "Japan’s trade negotiator may visit the US this week, FNN reported. The country is also preparing a joint communique for its US investments." - BBG
• "JAPAN MULLS 5-YEAR TAX BREAK ON CAPITAL INVESTMENTS: YOMIURI" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 148.00($992m), 146.35($716m).Upcoming Close Strikes : 148.00($893m Aug 27), 146.50($1.14b Aug 29), 145.00($1.7b Aug 29)  - BBG.
• CFTC data shows last week asset managers have begun to add to their JPY longs after a consistent period of reduction +71379( Last +60866), leveraged funds though again used the dip to add to their newly built short JPY position -50848(Last -41257).
• Data/Event : PPI

Fig 1 : USD/JPY Spot 2H Chart

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