AUSSIE BONDS: Richer, Treasurer Chalmers & RBA Board Agree On Communication
ACGBs (YM +4.0 & XM +7.0) sit richer, hovering near Sydney session bests, on a data-light day.
- (Bloomberg) -- Australian Treasurer Jim Chalmers and the Reserve Bank's interest-rate setting board have agreed that members will conduct at least one speech or public engagement a year, as well as publishing unattributed votes.
- Cash US tsys are flat to slightly cheaper, with a flattening bias, in today's Asia-Pac session. Today's US calendar: Initial Jobless Claims and $22 Bln 30-year bond auction.
- (Bloomberg) "At the end of the day, however, the US isn't the main game for Australian exports - the bigger threat to the economy from tariffs stems from the impacts on China and Japan, and on consumer and business confidence."
- Cash ACGBs are 5-7bps richer with the AU-US 10-year yield differential at -6bps.
- The bills strip has bear-flattened, with pricing flat to +4.
- RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in August is given a 90% probability, with a cumulative 62bps of easing priced by year-end.
- Tomorrow, the local calendar will be empty apart from the AOFM’s planned sale of A$1000mn of the 2.75% 21 November 2029 bond.
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OIL: Crude Holds Recent Gains While Watching Trade Talk Progress
Oil has held onto gains from recent trading during today’s APAC session with prices slightly higher as the market watches the second day of US-China trade talks to take place today. WTI is up 0.2% to $65.39/bbl but off the intraday high of $65.66. It remains above resistance at $64.86. Brent is 0.3% higher at $67.21/bbl following a peak of $67.40, approaching resistance at $67.73, a Fibonacci retracement level. The USD index is up 0.2%.
- Crude reacted sharply to the announcement of US reciprocal tariffs on fears of their impact on global energy demand. Thus it is watching the US-China trade talks closely and is currently mildly optimistic following US Commerce Secretary Lutnick describing negotiations so far as “fruitful”.
- The other issue markets are watching is US-Iran nuclear negotiations. The UN said that Iran’s stockpiling of almost weapons grade uranium needs to be monitored and addressed. There is a UN watchdog meeting this week in Vienna followed by one between the US and Iran in Oman on Sunday, according to Iranian officials.
- Later US May NFIB small business optimism and UK April/May labour market data are released. ECB’s Donnery and Buch appear. The focus remains on Wednesday’s May US CPI data but also Thursday’s US long-dated Treasury auction given fiscal concerns.
BUND TECHS: (U5) Pullback Appears Corrective
- RES 4: 132.00 Round number resistance
- RES 3: 131.85 High Apr 22 and the bull trigger
- RES 2: 131.50 High May 7
- RES 1: 131.47 High Jun 5
- PRICE: 130.40 @ 05:39 BST Jun 10
- SUP 1: 130.12 Jun 5 low
- SUP 2: 129.30/13 Low May 22 / 15 and key short-term support
- SUP 3: 128.97 Low May 14
- SUP 4: 128.40 Low Apr 9
Bund futures are unchanged. The latest pullback still appears corrective - for now - and the trend condition remains bullish. The recovery that started May 14 suggests the move down between Apr 22 - May 14, has been a correction. A resumption of gains would signal scope for a climb towards 131.85, the Apr 22 high. Key short-term support to watch is 128.97, the May 14 low. First support lies at 130.12, the Jun 5 low.
AUSSIE BONDS: Futures Modestly Richer, Bus Survey Shows Pick Up In Labour Costs
ACGBs (YM +2.0 & XM +3.0) are modestly stronger after today’s confidence data.
- NAB business price/cost components in May were mixed, containing elements of concern and optimism. The pickup in labour costs in addition to signs that wage growth is rising again, is likely to be monitored closely. The employment component of the survey though was very weak, which may pressure pay gains.
- Westpac's measure of consumer confidence rose 0.5% in June to 92.6 after May's 2.2% increase, boosted by 50bp of RBA easing this year and lower inflation. The index is at its highest since January, but still 1.8% below that level as global events have weighed on sentiment.
- Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's modest rally.
- Cash ACGBs are 3bps cheaper after yesterday's holiday with the AU-US 10-year yield differential at -18bps.
- The bills strip has twist-flattened, with pricing -3 to +2.
- RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in July is given an 82% probability, with a cumulative 73bps of easing priced by year-end.
- Tomorrow, the local calendar will be empty.
- The AOFM plans to sell A$1000mn of the 1.75% 21 November 2032 bond tomorrow.
