AUSSIE BONDS: Little Changed, Light Calendar, May-32 Supply Due

ACGBs (YM -1.0 & XM -1.0) are little changed despite a moderately strong close for US tsys on Friday. 

• FT - "Donald Trump has escalated his demands in trade negotiations with the EU, pushing for a minimum tariff of 15 to 20 per cent in any deal with the bloc, according to three people briefed on the talks.”
• The U.Mich consumer survey saw inflation expectations surprise lower in the preliminary July survey, with the 1Y at 4.4% (cons 5.0 after 5.0 in June) and 5-10Y at 3.6% (cons 3.9 after 4.0 in June). The 1Y is the lowest since January and the 5-10Y is the lowest since February.
• Cash ACGBs are little changed with the AU-US 10-year yield differential at -7bps.
• The bills strip is little changed.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in August is given a 99% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will be empty, ahead of the RBA Minutes for the July Meeting tomorrow.
• A new 21 October 2036 Treasury Bond is planned to be issued via syndication this week (subject to market conditions).

In local morning trade, NZGBs are 2bps richer on the day and after today’s Q2 CPI data.

• NZ CPI rose less than economists expected in Q2. Headline CPI rose 0.5% q/q 2.7% y/y (estimate +0.6% and 2.8%). Tradeables rose 0.3% q/q, less than forecast, while non-tradeables were in line at 0.7% q/q.
• (Bloomberg) “The central bank paused its interest-rate cuts earlier this month, holding the Official Cash Rate at 3.25% to assess the uptick in inflation, but said it will resume easing if price pressures abate as expected. Economists predict at least one further quarter-point reduction in the OCR this year as the economy’s recovery from last year’s recession shows signs of stalling in the face of global uncertainty.”
• On Friday, US tsys finished moderately richer, with a slight steepening bias.
• Swap rates are 2-3bps lower.
• RBNZ-dated OIS pricing is softer across meetings following today’s CPI data. At the time of writing, 20bps of easing is priced for August, with a cumulative 34bps by November 2025 versus 16bps and 30bps before the data.

Oil prices were off their intraday high to finish Friday slightly lower. The EU announced further restrictions against Russian fossil fuel including refined products as its war against Ukraine continues. 

• WTI fell 0.4% to $67.30/bbl after reaching $68.96 earlier before falling to $67.20. It was down 1.7% last week but still up 3.4% in July. It has started today slightly higher at $67.54/bbl. Initial resistance is at $71.20, while support is at $65.92, 30 June low.
• Brent was also 0.4% lower at $69.23/bbl to be down 1.4% on the week but up 4% on the month. It rose to $70.77 and then fell to $69.14 as US President Trump said that he wanted 15-20% tariffs on imports from the EU. The bearish theme persists with initial support at $65.92. Initial resistance is at $72.66, 50% of the June 23-30 range.
• The EU announced a reduction in the price cap for Russian crude and further targeting of its shadow fleet as well as another 20 banks losing access to the global payments system SWIFT. Importantly, there will now be limitations on third country refined products from Russian crude, which will impact India who is a large exporter of refined fuel to Europe. This move is likely to impact the already tight diesel market, according to Bloomberg.