BONDS: NZGBS: Closed With A Modest Twist-Flattener

Gold prices jumped to $3395.07 at the start of today’s APAC trading, the highest since mid-June, on flight-to-quality following US action in Iran. However, the prospect that the conflict will lead to higher inflation through energy prices thus delaying central bank easing is weighing on non-interest bearing gold with it now down 0.3% to $3357.9 after a low of $3352.1. The stronger US dollar (USD BBDXY +0.3%) and slightly higher US yields are also pressuring bullion.

• Gold continues to trade between initial support at $3338.8 and resistance at $3451.3.
• With positions in gold so long (well above 2016 and 2020 levels), silver and palladium have become safe-have substitutes. Silver is up 0.1% to $36.05 today following a high of $36.20 and a low of $35.84, holding above initial support at $35.43. A bull wave persists with initial resistance at $37.32, 18 June high.
• Middle Eastern developments have driven a pullback in risk with the S&P e-mini down 0.3%, KOSPI -0.5% and Hang Seng -0.1%. Oil prices are higher with WTI +1.7% to $75.09/bbl. Copper is down 0.3%.
• Later the Fed’s Waller, Bowman, Goolsbee, Williams and Kugler as well ECB President Lagarde speak. US and European preliminary S&P Global/HCOB June PMIs are released. 

NZGBs closed little changed, reversing early modest gains following US airstrikes on Iranian nuclear sites over the weekend.

• Cash US tsys are 1-2bps cheaper in today's Asia-Pac session as the markets digest the possible implications of a longer and more sustained US involvement in the Middle East conflict and how Iran might react to this, potentially blocking the Strait of Hormuz. Today's US calendar: S&P Global US PMI's, Existing Home Sales.
• (Bloomberg) - "New Zealand's dollar is particularly vulnerable in the event of a haven rally in the US currency should the conflict between Iran and Israel pose constraints on oil supply, according to Bank of America Corp."
• Swap rates closed flat to 1bp lower.
• RBNZ dated OIS pricing closed flat to 4bps softer across meetings. 4bps of easing is priced for July, with a cumulative 28bps by November 2025.
• Tomorrow, the local calendar will be empty, ahead of trade balance data for May on Wednesday.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.

Many of the major regional bourses all fell today as the escalating situation in the Iran weighed heavy on investor appetite.  Regional currencies fell against the USD and even bond markets were down as oil prices jumped and uncertainty grew.  

• China has had a mixed day with the Hang Seng starting the week lower by -0.13% and the CSI 300 following suit, down -0.20%.  Shanghai Comp bucked the trend and is up modestly be +0.15% and Shenzhen is up +0.21%.  
• The TAIEX in Taiwan fell heavily today by -1.38% wiping out last week's gains.  
• After a very strong week last week, the KOSPI couldn't avoid the regional weakness and is down -0.50%
• The FTSE Malay KLCI was one of the few outliers, clinging onto gains of +0.44%.
• The Jakarta Composite was under pressure falling -1.85%
• The FTE Straits Times in Singapore is down -0.41% whilst the PSEi in the Philippines is down -2.06% for its biggest fall since early April
• The NIFTY 50 is down -0.97% having closed Friday strongly with gains of +1.29%