JGBS: Futures Extend Gains Overnight After US CPI Miss, Light Calendar

ACGBs (YM +5.0 & XM +1.0) are stronger after recent Middle East headlines.

• A draft Iran–U.S. memorandum reportedly proposes lifting oil sanctions and the naval blockade, reopening the Strait of Hormuz, releasing $24 billion in frozen Iranian assets, and launching nuclear talks. European leaders backed sanctions relief conditional on verifiable nuclear steps and supported regional stability and ceasefires. – RTRS
• President Trump on Truth Social:” This Great Deal will bring Peace and Security to the whole Region. Many presidents have tried to make Peace with Iran, and all have failed before me.”
• "*TRUMP SAYS REACHED IRAN DEAL DESPITE NETANYAHU OBJECTIONS: NYT"
• "*TRUMP SAYS DEAL TO ASSURE STRAIT IS PERMANENTLY TOLL FREE: NYT"
• Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at +30bps.
• The bills strip has bull-flattened, with pricing flat to +6 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 5% for June to 34% by September and 52% by December 2026.  
• The local calendar will be empty until the RBA's Policy Meeting next Tuesday.
• This week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond on Wednesday and A$700mn of the 1.25% 21 May 2032 bond on Friday.

NZGBs are 4bps richer after recent Middle East headlines.

• A draft Iran–U.S. memorandum reportedly proposes lifting oil sanctions and the naval blockade, reopening the Strait of Hormuz, releasing $24 billion in frozen Iranian assets, and launching nuclear talks. European leaders backed sanctions relief conditional on verifiable nuclear steps and supported regional stability and ceasefires. – RTRS
• NZ’s retail card spending rose 1.7% m/m in May versus revised -1.2% in April.
• NZ’s PSI dropped to 47.5 in May from a revised 48.7 in April. PSI indicates a sector “struggling to get its head back above water”: BNZ senior economist Doug Steel. - BBG
• The focus is likely to be on Thursday’s Q1 GDP data.
• Q1 GDP prints Thursday and Bloomberg consensus expects it to rise 0.8% q/q & 1.0% y/y. There was a strong rise in Q1 manufacturing volumes, which with a solid rise in real retail sales and export volumes in the quarter should support GDP growth. The RBNZ has a 1% q/q Q1 increase in its May forecasts but expects Q2 to be flat as the impact of the Iran War is felt by the NZ economy.
• RBNZ-dated OIS pricing is little changed across meetings. 20bps of tightening is priced for July, while February 2027 assigns 76bps.

"JOINT STATEMENT FROM THE LEADERS OF THE E4, UK, FRANCE, GERMANY AND ITALY: WE ARE PREPARED TO LIFT RELEVANT SANCTIONS IN RESPONSE TO CLEAR, VERIFIABLE STEPS BY IRAN ON ITS NUCLEAR PROGRAMME.

JOINT STATEMENT FROM THE LEADERS OF THE E4 LEADERS: THE URGENT RE-OPENING OF THE STRAIT OF HORMUZ WITH UNCONDITIONAL AND UNRESTRICTED FREEDOM OF NAVIGATION IS ESSENTIAL

JOINT STATEMENT FROM E4 LEADERS: WE STAND READY TO WORK WITH THE US, IRAN AND THE IAEA TO THIS END.

JOINT STATEMENT FROM E4 LEADERS: WE REAFFIRM FULL SUPPORT TO THE STABILITY, SOVEREIGNTY AND TERRITORIAL INTEGRITY OF LEBANON AND THE IMPORTANCE OF A ROBUST CEASEFIRE." RTRS