BONDS: NZGBS: Closed With A Modest Bull-Steepener

ACGBs (YM -2.5 & XM -4.5) are weaker but off cheaps on a data-light session.

• (Bloomberg) “Some 42% of respondents named US tariffs as their top concern compared with 37% who cited the strategic threat from China, according to a Newspoll published Monday in The Australian. A further 21% said neither bothered them, the survey conducted Aug. 11-14 for the newspaper showed.”
• Cash US tsys are 1-2bps richer in today's Asia-Pac session. This week's US calendar includes residential sector data (housing starts, homebuilder sentiment, existing home sales) and flash August PMI data as well as a few Fed speakers (notably Waller and Bowman) ahead of Friday's keynote speech by Fed Chair Powell as part of the annual Jackson Hole symposium Aug 21-23.
• Cash ACGBs are 3-4bps with the AU-US 10-year yield differential at -4bps.
• The bills are -1 to -3, with the strip steeper.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in September is given a 28% probability, with a cumulative 36bps of easing priced by year-end.
• Tomorrow, the local calendar will see Westpac Consumer Confidence.
• This week, the AOFM plans to sell A$1500mn of the 1.25% 21 May 2032 bond on Wednesday and A$300mn of the 4.75% 21 June 2054 bond on Friday.

Asian equity markets are mostly on the front foot in the first part of Monday dealings, although there are some pockets of weakness. The lead from US markets on Friday was softer, particularly in the tech space. US futures are up a touch in the first part of Monday dealings, while EU futures are also higher. Market attention remains on US-Ukraine talks later, with focus on whether a peace deal to end the Russia-Ukraine conflict can be reached. The knee-jerk reaction from any peace deal reached is likely to be positive for risk appetite.

• China markets are outperforming. The CSI 300 was last up around 1.5%, putting the index near 4266, which is fresh intra-session highs back to early Oct last year. Hopes of fresh stimulus after disappointing July data is aiding sentiment, while there is also talk of outflows from bonds into equities (the 10yr yield is up 4bps to 1.78%). US President Trump also stated late last week that he will hold off raising China tariffs over their Russian oil purchases.
• Indian markets are also up firmly (+1.5%. For the Nifty, we are back above the 25000 region, last seen in late July. If the better equity tone sees offshore investors return, we could see further gains. This follows a period of underperformance for Indian shares. The proposal by PM Modi to the lower the GST is seen as a positive for consumer sentiment, and more broadly growth, particularly if we can be matched with a more reform orientated government. Another equity market positive is potentially closer India-China ties.
• Japan markets are higher, the Topix +0.60%, the NKY 225 up close to 0.80%. South Korean markets have returned after Friday's break and are off over 1%, putting the Kospi back under 3200. Taiwan stocks are holding up better, despite a Friday slump in the US SOX index.
• Australia's markets is around flat, as we sit near record highs.
• In South East Asia, trends are mixed. Singapore is softer, but Malaysia and the Philippines have ticked higher. Indonesian markets are out today.

Oil prices are slightly higher today after falling over a percent on Friday. WTI is up 0.2% to $62.91/bbl after falling to $62.46 early in the session. Brent is 0.1% higher at around $65.89/bbl after a low of $65.47. Prices fell on the open of trading on what appeared to be some progress towards a Ukraine peace deal with Ukraine’s President Zelenskyy and other European leaders to meet with US President Trump today. The market is also relieved that punitive tariffs on China for buying Russian fuel currently seem off the table. 

• Russia is apparently offering to hold its frontlines in Kherson and Zaporizhzhia in exchange for the Donbas. US special envoy Witkoff said that the US/European security guarantee could “effectively offer Article-5 like language” (NATO), as reported by the BBC.
• Trump wants an agreement with him stating on Truth Social that “Ukraine can end the war with Russia almost immediately”. It is worth noting that Ukraine has to hold a referendum though to agree to official territory changes.
• If Russia walks away from negotiations then US sanctions are likely to be extended including punitive tariffs on those who buy its fuel which could impact supplies and push oil prices higher.
• Later the Fed’s Bowman speaks. In terms of data, euro area June trade and August US NY services & NAHB housing indices print.