AUSSIE 10-YEAR TECHS: (M5) Bear Cycle Remains Intact For Now

TYM5 reopens at 110-04, up 0-05 from closing levels in today’s Asia-Pac session.

• Overnight US 10-year yields had a range of 4.4197% - 4.5026%, closing around 4.46%. 
• Treasury yields ended slightly lower overnight, with the yield curve steepening (2s10s +0.63 at 46.068).
• MNI US Data - There is little in this report alone to suggest a meaningful gap between CPI and PCE - in other words, the slight downside miss in core CPI doesn't carry a major re-interpretation for PCE via the components. Note April core PCE consensus was 0.24% M/M coming into today, and while this may dip slightly we doubt forecasts will be radically changed (core CPI came in at 0.22% M/M).
• As for broader trends, the core CPI six-month rate held at 3.0% annualized for a second month in April having moderated from 3.7% in January, although it’s still a fourth consecutive month above the Y/Y.

• The 10-year Yield range seems to be 4.10% - 4.5%, price is currently testing the upper bound of the range around 4.50%. A sustained break above this level would see another round of selling targeting the 4.75% area.

   

The AUD had a range overnight of 0.6401 - 0.6479, Asia is opening around 0.6465. US Stocks have extended their push higher, the AUD has benefited from this as well as being used as a China-proxy.

• (Bloomberg) -- "Chinese President Xi Jinping told Australian Prime Minister Anthony Albanese that deepening bilateral cooperation is important for the two nations’ joint development, as well as promoting world peace and stability, according to the official Xinhua News Agency."
• “Traders are winding back bets on aggressive monetary easing by Australia in a cascading effect from the US and China agreeing to temporarily lower tariffs on each other’s products, write BN’s Matthew Burgess and Swati Pandey. Money market pricing now implies the RBA will only cut interest rates three times this year, including one next Tuesday. Just four weeks ago, when US President Donald Trump’s massive tariffs on China threatened to send the world economy into a tailspin, markets were anticipating at least five RBA cuts with a decent chance of a sixth.”(BBG)
• The AUD/USD once more found good demand sub 0.6400 and has since bounced nicely with the double whammy of risk moving higher and the market buying the AUD as a proxy for China.
• Key Support in the AUD is back towards 0.6300 a close back below here would start to challenge the newly formed uptrend. While this holds the market should continue to find demand on dips.
• CFTC Data shows Asset managers have started to build shorts again after paring them almost back to 0, the Leveraged community reduced their shorts again last week.

• Data/Event: Wage Index, Home Loans Value

  Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

Reuters reports in an opinion poll that Trump's approval rating has risen, while Americans are also less concerned about recession risks (albei still remaining at an elevated level). 

• Reuters noted: "The two-day poll showed 44% of respondents approved of the Republican leader's performance, up from 42% in a prior Reuters/Ipsos survey carried out April 25-27." "Approval of Trump's economic stewardship rose to 39% from 36%".
• On recession concerns, Reuters noted: "Some 69% of respondents in the new poll said they were concerned about a recession, down from 76% in a Reuters/Ipsos poll conducted April 16-21."
• These results follow the recent recovery in US equity market sentiment, with bourses up strongly from recent lows. Tariff delays, coupled with hopes of a US-China trade deal at some stage over the next few months, have been key factors around the equity bounce and reduced recession odds.