AUSSIE BONDS: Richer After WPI & RBA Hauser Remarks, Jobs Report Tomorrow

Oil prices are off their highs at the start of Monday’s trading in response to the escalation of the US-Iran conflict over the weekend but have still held onto most of the day’s gains. WTI is up 2.3% to $84.39/bbl after reaching $85.39. Brent is 2.4% higher at $90.22/bbl following a high of $91.42, breaking above resistance at $90.61 but unable to sustain it. With Iran and the US continuing to attack and reports of commercial shipping on fire, the MoU is a distant memory and moves to revive it currently seem remote.

• Kuwait intercepted Iranian drones and the US embassy in Bahrain reported that Iran may target central Manama. Kuwaiti oil infrastructure was struck by Iran on the weekend.
• With few vessels able to traverse the Strait, the hoped for increase in global oil and product supplies has been derailed. Countries used inventories to ensure adequate fuel ahead of the MoU but now with stockpiles low and little sign of a resumption of talks, energy concerns are increasing again.
• Iranian attacks on US bases in Jordan and Iraq resulted in the deaths of US military personnel on the weekend. The US attacked Iran’s Qeshm Island and an under-construction nuclear power facility, which the IAEA said had no fuel when it last visited.
• Later the June US leading index and Canadian June CPI print. 

ACGBs (YM -8.0 & XM -6.0) are heavy to start the week on a local data-light day. 

• MNI Techs (YMU6): The M/T uptrend that started Mar 23 is intact and pullback since Jun 25 appears corrective. MA studies on the continuation chart are in a bull-mode position highlighting a dominant uptrend. An extension of the corrective cycle would open 95.428, a trendline support drawn from the Mar 23 low on the continuation chart.
• TYU6 is dealing at 109-01+, -0-07 from closing levels in today's Asia-Pac session, pressured by firmer oil prices. There has been no cash trading today so far with Japan out on holiday.
• "IRAN'S REVOLUTIONARY GUARDS SAY TWO OIL TANKERS WERE BLOWN UP AFTER ATTEMPTING TO TRANSIT SOUTHERN ROUTE OF STRAIT OF HORMUZ - [RTRS]"
• Cash ACGBs are 6-8bps cheaper.
• The bills strip has bear-steepened, with pricing -2 to -8 across contracts.
• RBA-dated OIS pricing shows modest tightening across all meetings, with the probability of a 25bp hike rising from 27% for August to 84% by December 2026.  
• Tomorrow, the local calendar will be empty.
• This week, the AOFM plans to sell A$900mn of the 2.75% 21 June 2035 bond tomorrow and A$900mn of the 3.25% 21 April 2029 bond on Friday.

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NZGBs closed 5-7bps cheaper, with the NZ-US 10-year yield differential at +16bps, its highest level since late May, after reaching as low as -10bps earlier this month. However, there has been no cash trading for US tsys so far today with Japan out on holiday.

• The 10-year differential had narrowed from around +50bps in late March, when NZ's long-term issuer default rating outlook was revised to negative from stable.
• Since then, the NZ–US 1Y3M swap spread narrowed by around 100bps, with the 10-year yield differential compressing broadly in line.
• However, the NZ–US 1Y3M swap spread has widened by around 50bps during July, reflecting lower US rates following softer US inflation data and higher NZ rates ahead of tomorrow's Q2 CPI release.
• Swap rates closed 3-6bps higher.
• RBNZ-dated OIS pricing is currently 11-30bps firmer across meetings than this month’s pre-hike levels. Ahead of tomorrow’s Q2 CPI data, the market has priced 24bps of tightening for the September meeting, with 78bps (3.28%) priced by February 2027. The market is now also pricing an expected OCR peak above 3.50%, marking a new cycle high.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.50% Apr-33 bond, NZ$150mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

Bloomberg Finance LP