JGBS: Heavy After Yesterday's Holiday, US CPI Data Due

ACGBs (YM -3.5 & XM -3.0) are modestly cheaper on a local data-light day.

• The focus has been on any potential fall-out from the weekend’s re-escalation in the US-Iran conflict.  The US said that it struck Iran's air defence systems today, while Iran has targeted US' drone centre in Bahrain and Jordan's Prince Hassan air base which the US uses. Kuwait reported that it had engaged in "hostile aerial targets" heading for US military positions and that an offshore rig had been struck. Jordan said it had shot down four missiles from Iran.
• Cash US tsys are ~2bps cheaper in today's Asia-Pac session.
• Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +28bps.
• The bills strip has bear-steepened, with pricing -1 to -4 across contracts.
• RBA-dated OIS pricing shows modest tightening across all meetings, with the probability of a 25bp hike rising from 24% for August to 58% by December 2026.  
• Tomorrow, the local calendar will see Consumer and Business Confidence.
• This week, the ACGB supply will be greater than the recent average weekly issuance of $1000mn. The AOFM plans to sell A$400mn of the 5.00% 21 June 2036 bond tomorrow, A$700mn of the 4.50% 21 April 2033 bond on Wednesday and A$700mn of the 2.50% 21 May 2030bond on Friday.

TYU6 is dealing at 108-30, -0-03 from closing levels in today's Asia-Pac session.

• Cash bonds are ~2bps cheaper in today's Asia-Pac session, reacting to the recent re-escalation in the US-Iran conflict, after finishing Friday showing a modest twist-flattener.
• Oil prices are currently higher than the spike at Monday’s open as the US and Iran continue to attack each other. WTI is up 4.3% to $74.50/bbl off the intraday high of $74.66, while Brent is 4.1% higher at $79.16/bbl after a high of $79.55.
• The US said that it struck Iran’s air defence systems today, while Iran has targeted US’ drone centre in Bahrain and Jordan’s Prince Hassan air base which the US uses. Kuwait reported that it had engaged in “hostile aerial targets” heading for US military positions and that an offshore rig had been struck. Jordan said it had shot down four missiles from Iran.
• No data today, focus is on this week's CPI and PPI data on Tuesday/Wednesday respectively, as well as Fed Chair Warsh testimony to the Senate Banking Comm on Wednesday.

Bloomberg Finance LP

NZGBs closed 3-6bps cheaper, with the 2/10 curve flatter. Today’s move reflected both offshore and domestic factors. 

• Cash US tsys are ~2bps cheaper in today's Asia-Pac session, reacting to the recent re-escalation in the US-Iran conflict.
• NZ's June performance of services index rose 2.6 points to 50.6, the highest since December but only just in growth territory. 
• "RBNZ Nowcast Estimate of 2q GDP Growth Surges to 0.9%. Gauge surges from flat a week earlier and showed a slight contraction in mid-June." – BBG
• Swap rates closed showing a bear-flattener, rates 5-8bps higher.
• RBNZ-dated OIS pricing is 9–19bps firmer across meetings than last week's pre-hike levels. Ahead of last Wednesday's 25bp rate increase to 2.50%, the market had priced around 21bps of tightening, with a further 49bps of tightening expected by February 2027. The February 2027 contract now implies 67bps of cumulative tightening.
• The Treasury announced the launch of a new 4.75% coupon 15 May 2038 nominal NZGB. The Treasury expects to issue at least NZ$5.0bn with the transaction capped at NZ$7.0bn. Initial price guidance is 6-10bps over the 15 April 2037 bond. The issue will be priced tomorrow.
• Tomorrow the local calendar will see NZIER Business Opinion Survey, Net Migration and RBNZ Chief Economist Conway Speech on Inflation.