AUSSIE BONDS: Dec-35 Supply Faces Lower Yield But Same Curve
The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 4.25% 21 December 2035 bond. The line was last sold on 21 May 2025 for A$1200mn. The line was opened via syndication on 24 July 2024 for A$11.5bn. Bidding is likely to be shaped by several key factors:
- The current outright yield is 5-10bps lower than the previous auction and approximately 40bps lower than the peak in late 2024.
- The 3/10 yield curve is around the same level as the previous auction but sits around 20bps below its recent high.
- On the negative side also, the auction comes amid weaker sentiment toward longer-dated global bonds.
- However, the line is included in the XM basket.
- While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
- Results are due at 0200 BST / 1100 AEST.
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US TSYS: Futures Track Sideways, Tsy Yields Little Changed
US Tsy futures have started Monday's session tracking sideways. We were last at 109.31, +02, for the September 10yr future. Cash Tsy yields have opened up a little mixed, with back end slightly firmer in yield terms. The 10yr yield was last near 4.51%. We have seen some softness in the front end, the 2yr last around 4.02%, off close to 2bps versus end Friday levels.
- The US 2/10s Tsy curve was last around +49bps, slightly stepper versus end Friday levels, but still well within recent ranges.
- Weekend news flow was focused on US protests in major cities, along with planned US-China trade talks, which resume in London today. US equity futures were around flat in latest dealings.
- The main data focus will be on Wednesday's CPI print.
OIL: Crude Breaks Above Resistance On Trade Hopes
Oil prices jumped on Friday boosted by news that US-China trade talks would take place in London on Monday and data showing no deterioration in the US labour market in May following the reciprocal tariff announcement at the start of April. The market had been worried that increased protectionism and uncertainty would weigh on energy demand. The USD index rose 0.3%.
- WTI rose to a high of $64.80/bbl following the better-than-expected US payroll data. It finished up 2.2% to $64.77 to be up 6.6% on the week. It has started today lower at $64.60, but remains above initial resistance at $64.19 opening up $65.82, a key level. The bear trigger is at $54.33. Bloomberg reports that volatility is close to its lowest since early April as benchmarks range trade.
- Brent reached $66.67/bbl and finished up 2% at $66.65 to be 6.2% higher on the week. It is currently around $66.56. The benchmark traded above both the 50-day EMA at $65.28 and 13 May high at $66.30 opening up $67.73. The bull trigger is at $73.88, 2 April high. The bear trigger is at $57.78.
- Supply developments remain in focus following OPEC’s decision to increase output 411kbd from July and Saudi comments that it is considering further rises over the northern hemisphere summer. At the same time, Iran-US talks are ongoing and if there is an agreement may ease sanctions on oil exports, but Ukraine-Russia ceasefire negotiations appear to have failed with the possibility restrictions on Russia will be expanded.
MNI: MNI JAPAN Q1 GDP REV -0.0% Q/Q; PRELIM -0.2%; MEDIAN -0.2%
- MNI JAPAN Q1 GDP REV -0.0% Q/Q; PRELIM -0.2%; MEDIAN -0.2%
- JAPAN Q1 ANNUALIZED GDP REV -0.2%; PRELIM -0.7%; MEDIAN -0.7%
