AUSSIE BONDS: Modestly Richer With US Tsys, Jobs Report Due

In local morning trade, NZGBs are little changed, with the NZ-US 10-year yield differential 3bps tighter after markets reversed the initial risk-off. With Israel’s aerial attack dominating, the conflict not spreading to include other countries, and oil infrastructure not targeted, the markets adopted a more sanguine view, with risk assets recovering and US tsys selling off.

• US President Trump has posted on Truth Social, stating that Iran should have signed the deal he told them to sign, while also reiterating that Iran cannot have a nuclear weapon.
• NZ food prices rose 0.5% from a month earlier in May.
• Rabobank’s Q2 survey of farmer confidence showed that 44% of farmers expect agricultural economic conditions to improve in the coming 12 months, matching Q1 and the highest since Q2 2017. Key drivers of optimism were rising commodity prices and the outlook for overseas markets. (per BBG)
• REINZ House Price Index falls 0.6% m/m in May, +0.1% y/y.
• Swap rates are unchanged.
• RBNZ dated OIS pricing is little changed across meetings. 4bps of easing is priced for July, with a cumulative 28bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 2.75% Apr-37 bond and NZ$50mn of the 2.75% May-51 bond.

Gold prices trended lower through Monday as safe haven flows moderated and reached a low of $3383.03/oz following news that Iran wants to discuss an end to the hostilities and a resumption of negotiations on its nuclear agenda conditional on the US remaining out of the conflict. They finished down 1.4% to $3385.23 to be up 2.9% in June. Bullion has started today up 0.3% to $3395.5 though following US President Trump’s comments that Iran should have signed a nuclear deal when it had the chance and that people should evacuate Tehran.

• Trump has reiterated that Iran wants to start negotiations but since it is in the stronger position Israel plans to continue weakening Iran’s military capability. Iran wants to ensure that the US doesn’t join the conflict. But Iran and Israel continued attacks overnight demonstrating ongoing geopolitical risks that could drive another rise in gold prices.
• The improvement in risk appetite associated with this news and higher US yields pressured bullion on Monday. The USD index was off its intraday low to be flat on the day.
• The bullish theme in gold remains intact with initial resistance at $3451.3, Monday’s intraday high, followed by $3500.1, the bull trigger. Initial support is at $3335.5, 20-day EMA.
• Equities rallied with both the S&P and Euro stoxx up 0.9% but the S&P e-mini has begun today down 0.4%. Oil prices were lower with Brent down 2.3% to $72.50/bbl. Copper was unchanged. Silver was slightly higher at $36.32.

The overnight range was 143.65 - 144.88, Asia is currently trading around 144.60. USD/JPY has ignored the broad USD weakness as JPY longs are pared back in the crosses in response to US Equities moving higher and now eyeing all time highs. 

• MNI - The BoJ is expected to keep its policy rate unchanged at 0.50% at its June 16-17 meeting. The key area of interest will be Governor Kazuo Ueda's post-meeting press conference. Investors will closely examine his comments for any signals on the timing and likelihood of future rate hikes. The second area of market focus is on the BoJ's JGB purchase program. Market expectations suggest a slower pace of reductions during fiscal year 2026. If the BoJ chooses to maintain the current pace of 400 billion reductions per quarter in FY2026, this would be interpreted as a mildly hawkish move.
• (Bloomberg) - “The recent softening of the yen could already partly reflect expectations for a cautious policy update from the BOJ alongside negative spill-overs for Japan from the Middle East conflict,” wrote Lee Hardman, senior currency analyst at MUFG. “While the BOJ is expected to leave their policy rate unchanged tomorrow, there is a strong expectation amongst market participants heading into the meeting that they will adjust their plans for QT,” he said."
• USD/JPY continues to hold above its support back towards the 142.00 area, with oil surging again and US yields bouncing this pair has drifted back to the middle of its recent range.
• Price is back in its recent 142.00 - 147.00 range and will need a break either side of that to get a clearer direction. The large interest around 145.00 expired overnight.
• The market still seems confident of a move lower in USD/JPY but with positioning quite large now we have seen the risk of pullbacks increase. A break above 147.00 would be needed to challenge the conviction of any shorts.
• Options : Close significant option expiries for NY cut, based on DTCC data: 143.25.($350m). Upcoming Close Strikes : 146.00($1.85b June 20).
• CFTC data shows Asset managers maintained their already extensive JPY longs, leveraged funds looked to have pared back their own longs once more.

• Data/Event : BOJ

  Fig 1 : USD/JPY Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg Finance L.P