JGBS: Futures Flat Overnight, US Retail Sales & Fed Hawks Had Little Impact

ACGBs (YM +2.0 & XM +3.0) are stronger after US tsys finished 1-4bps richer, with a flatter curve. 

• There was further constructive news flow over the nascent US-Iran ceasefire deal.
• "Iran is set to receive broad financial incentives under its agreement with the US, including the right to immediately sell oil, tap a $300 billion development fund and eventually unlock frozen assets, according to a near-final draft of the deal." - BBG
• MNI RBA WATCH: Bullock Keeps Hike Prospects Alive Despite Hold. Reserve Bank of Australia Governor Michele Bullock stressed that monthly economic data remain volatile and should not be overinterpreted following Tuesday's decision to leave the cash rate unchanged at 4.35%, warning further rate increases cannot be ruled out.
• Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +35bps.
• The bills strip pricing is flat to +3 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 33% for August to 52% by November and 56% by December 2026.  
• Today, the local calendar will see Westpac Leading Index.
• This week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond today and A$700mn of the 1.25% 21 May 2032 bond on Friday.

Oil prices continued the downtrend begun on 11 June during Tuesday and are now below $80/bbl. They fell close to 5% and are now over 12% lower this month, which is good news for the inflation outlook. The signing of a memorandum of understanding between the US and Iran on Friday which will allow not only the reopening of the Strait of Hormuz but also lifting of sanctions on Iran for oil, banking and transport. There are around 600 vessels waiting to traverse the waterway which will result in a substantial increase in supply, if it stays open, but global inventories also need to be rebuilt. Substantial risks around sustained peace remain though.

• Brent fell 4.6% to $79.34/bbl on Wednesday after reaching a low of $78.45. The break below key support at $81.45 strengthens the short-term bear theme and opened $75.06, 10 March low.
• WTI declined 5.1% to $76.62/bbl off the intraday trough of $75.52. It too breached key support at $77.22 and continues to hold below that level with prices starting Thursday around $76.72. The bearish theme has now been strengthened and the next level to watch is $71.64, 10 March low.
• According to Kpler data, algorithmic traders are currently 9% short Brent following 27% long the day before (Bloomberg).
• Goldman Sachs reduced its Q4 Brent projection to $80/bbl, as did Morgan Stanley, according to Bloomberg. Goldmans expects supply from the Gulf to return to pre-war levels already by end-July. However, the benchmark already traded below that level yesterday.
• Bloomberg reported that there was another large US crude inventory drawdown last week of 8.3mn barrels, according to API data. There was a gasoline build of 2.5mn but distillate fell 500k. The official EIA data are released on Wednesday.

NZGBs are 4bps richer after US tsys finished 1-4bps richer, with a flatter curve. 

• There was further constructive news flow over the nascent US-Iran ceasefire deal. WTI fell decisively below the $80/bbl mark.
• "IRAN'S TOP NEGOTIATOR QALIBAF IN CALL WITH LEBANON'S PARLIAMENT SPEAKER: ISRAEL MUST WITHDRAW FROM 'THE OCCUPIED AREAS' IN LEBANON, PEOPLE OF SOUTHERN LEBANON MUST RETURN TO THEIR HOMES. THE WAR MUST END ON ALL FRONTS, INCLUDING LEBANON" - BBG
• NZ’s current account deficit narrowed to NZ$1.01 billion in the first quarter. Current account deficit was 3.6% of GDP in the 12 months through March. Unchanged from revised 3.6% in the 12 months through December, previously 3.7%.
• Bloomberg - "Average price for whole milk powder fell to $3,589 from $3,706 at the previous auction, according to the GlobalDairyTrade website. GDT's weighted average price for all milk products was $3,979 a ton. The GDT price index change, which is a weighted average of the percentage changes in individual milk products between trading events, was a decrease of 2.8%."
• "NZ CONSUMER CONFIDENCE AT 80.4 IN Q2 FROM 94.7 PVS QTR - WESTPAC MCDERMOTT MILLER SURVEY" - RTRS
• RBNZ-dated OIS pricing is little changed across meetings. 18bps of tightening is priced for July, while February 2027 assigns 68bps.
• The local calendar will see Q1 GDP tomorrow.