US TSYS: Oil Edging Higher Again Could Stall Yield's Rally

ACGBs (YM +2.5 & XM +1.5) are stronger but well off session bests after paring significant early gains on reports Iran has reached out to resume talks. 

• WSJ - Iranian security chief Ali Larijani has made a fresh push to resume nuclear talks with Washington, Arab and U.S. officials said, hours after the negotiations were halted by U.S.-Israeli strikes.
• Some investors are pointing to an interview President Trump gave to the New York Times: TRUMP OPEN TO DROP IRAN SANCTIONS IF NEW LEADER PRAGMATIC: NYT
• US tsys are 2-4bps cheaper in today's Asia-Pac session.
• Cash ACGBs are 1-3bps richer with the AU-US 10-year yield differential at +67bps.
• The bills strip is +1 to +2 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 8% for March to 91% by June and 143% by December 2026.  
• Tomorrow, the local calendar will see Jan Building Approvals, and Q4 Current Account Balance and Net Exports of GDP. Governor Bullock also addresses the AFR Business Summit.
• This week, the AOFM plans to sell A$300mn of the 3.00% 21 March 2047 bond on Tuesday, A$900mn of the 4.75% 21 October 2037 bond on Wednesday and A$800mn of the 1.50% 21 June 2031 bond on Friday.

Bloomberg Finance LP

NZGBs closed little changed after paring significant early gains after reports Iran has reached out to resume talks. The market was 5bps richer early in the session. 

• WSJ - Iranian security chief Ali Larijani has made a fresh push to resume nuclear talks with Washington, Arab and U.S. officials said, hours after the negotiations were halted by U.S.-Israeli strikes.
• US tsys are 2-4bps cheaper in today’s Asia-Pac session, reversing the lion’s share of Friday’s gains.
• NZ-US 10-year yield differential is 4bps wider since Friday’s close.
• Swap rates closed 1-3bps higher.
• RBNZ-dated OIS pricing closed little changed across meetings. No tightening is priced for April, while December 2026 assigns 28bps.
• Tomorrow, the local calendar will see Building Permits data, ahead of Terms of Trade Index and ANZ Commodity Price on Wednesday.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond and NZ$200mn of the 4.5% May-35 bond.

Bloomberg Finance LP

The BBDXY has had a range today of 1188.70 - 1192.49 in the Asia-Pac session; it is currently trading around 1190, +0.20%. The BBDXY has pulled back from its early gap higher in early trading. The market has been very bearish the USD especially against EM so a protracted war which raises the level of uncertainty in markets would potentially add pressure to risk. How the USD reacts in a risk-off scenario will be key for currencies, it has been shunned in recent times and calls of its demise have been getting louder over the last year. In this environment the traditional response to the USD smile would see the market flocking back to the USD as a “safe-haven” particularly with oil moving higher. I am not pre-empting anything but the market is not positioned for this, especially in EM where liquidity can very quickly dry up and the exit door becomes very small. On the day, watch to see if the USD can build on this morning's strong open and test the important 1195-1200 area in the coming days. If the USD cannot find a bid in this environment it would be very telling.

• EUR/USD -  Asian range 1.17856-1.1796, Asia is currently trading 1.1790. The pair found some demand toward 1.1750 once more and has bounced since risk has attempted to bounce on reports Iran would like to resume talks. The bulls will be looking for the pair to hold above the 1.1700-1.1750 area. On the day, the range of 1.1750-1.1850 is still in place, how the USD trades should we get a risk-off scenario will be key. The Bulls will be looking for the price to remain supported toward the 1.1750 area, a sustained break below here could potentially put an end to that and signal a deeper pullback.
• GBP/USD - Asian range 1.3401-1.3456, Asia is currently dealing around 1.3445. This 1.3400-1.3450 area looks important for the bulls and it really needs to hold above the pivotal 1.3300 area for any chance of a base to form. On the day, I suspect rallies toward 1.3500 will be faded as the market looks to see how the USD will trade.
• Cross asset : SPX -0.30%, Gold $5185, US 10-Year 4.00%, BBDXY 1187, Crude Oil $65.35
• Data/Events : 8:00 a.m.: UK Feb. Nationwide House Prices, 8:00 a.m.: Germany Jan. Retail Sales, 9:00 a.m.: IAEA holds an extraordinary meeting on Iran, 10:30 a.m.: UK Jan. Mortgage Approvals, 1:30 p.m.: BOE’s Taylor speaks, 2:00 p.m.: Hegseth to hold press conference on Iran operations, 3:00 p.m.: ECB’s Lagarde, Nagel, Stournaras speak. 

Fig 1: GBP/USD Spot Daily Chart

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