OIL: Crude Higher Again But Iran Outlook Highly Uncertain, US EIA Data Out Later
Oil prices have continued trending higher during APAC trading as risk appetite improved in relief following President Trump’s comments that he wouldn’t sack Fed Chair Powell and that China’s tariffs would finish below the current 145%. China is the world’s largest importer of crude. The USD index is off today’s high but still up 0.2%.
- WTI is 0.9% higher today to $64.23/bbl after a peak of $64.48 and is now up slightly this week but still down sharply in April. Brent is up 0.8% to $67.98 with gains above $68.00 unsustained but is currently steady on the week. The prompt spread structure is in bullish backwardation, according to Bloomberg.
- With demand/supply concerns persisting, US inventory data remain in focus. US industry-based figures showed a sharp drawdown in crude and both gasoline and distillate, suggesting demand remains solid which has contributed to today’s higher oil prices. The official EIA data is out later today.
- Significant uncertainty around the outlook for Iran’s oil exports persists after the US Treasury said there would be stricter enforcement of sanctions and introduced measures against an LPG magnate with a large shipping fleet. Iran’s foreign minister is headed to China following recent talks with the US. China is the main buyer of its oil.
- Later there is more Fedspeak with Goolsbee, Musalem, Waller, Hammack and Kugler appearing. US preliminary April S&P Global PMIs, March housing data and the Fed’s Beige Book are released. European April PMIs and euro area February trade print.
- The IMF/World Bank & G20 finance ministers/central bank governors meetings take place. The ECB’s Lane and Cipollone participate in panels and BoE’s Bailey and Breeden also appear, while BoE’s Pill speaks at another event.
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GOLD: Gold Trending Lower on Profit Taking.
* Last week gold finally broke through US$3,000 for the first time in what for many analysts was earlier than expected.
* Gold began Monday at $3,022.15 and has trended lower for most of the session to be at $3,017.72.
* Up almost 16% year to date, gold has been one asset class that has benefitted from the factors driving global markets namely tariff risks, Federal Reserve policy uncertainty and inflation.
* Globally analysts have been adjusting their forecasts for gold for 2025 with some now predicting US$3,500 before year end.
AUSSIE BONDS: Subdued Session Ahead of Federal Budget Tomorrow & CPI (Wed)
ACGBs (YM flat & XM -1.0) are little changed on a data light session.
- Cash US tsys are 2-3bps cheaper across benchmarks in today's Asia-Pac session after Friday's uneventful end to the trading week. Monday's US focus will be on S&P flash PMIs alongside more Fed speakers including Atlanta Fed Bostic on Bbg TV and Fed Gov Barr on small business lending late in the afternoon.
- Cash ACGBs are 1bp richer to 1bp cheaper with the 3/10 curve steeper and the AU-US 10-year yield differential at +13bps.
- The swap curve has bull-steepened, with rates flat to 2bps lower.
- The bills strip is flat to +3, with a flattening bias.
- RBA-dated OIS pricing is flat to 2bps softer across meetings today. A 25bp rate cut in April is given a 4% probability, with a cumulative 68bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow will see the Federal Budget, with an election likely to be called soon after. It is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
- The key data item for the week is Wednesday's February CPI data.
CHINA: Bond Futures Do Little as the PBOC Withdraws Liquidity.
- A large liquidity withdrawal via this morning’s OMO did little to move the bond market with Bond Futures marginally lower.
- China’s 10YR future is lower by -0.01 at 107.45.
- The 10YR remains below all major moving averages with the nearest being the 200-day EMA at 107.55.
- China’s 2YR future is lower by -0.03 at 102.33.
- The 2YR future remains below all major moving averages with the nearest being the converged 200-day and 50-day EMA at 102.60.
- China’s 10YR government bond begins the week at 1.845%
- Data ahead for the week include Medium Term Lending Facilities (no change expected to interest rate) and industrial profits.
