AUSSIE BONDS: Richer With US Tsys Ahead Of Q2 CPI

In local morning trade, NZGBs are 1bp cheaper after US tsys finished Friday moderately cheaper. 

• Core PCE inflation came in at 0.179% M/M unrounded in May after 0.136% in April (an upward rev from 0.116% prior), which was higher than expected (consensus roughly around 0.15%, implying a split between 0.1% and 0.2% rounded)) with a higher revision.
• (Bloomberg) -- China firmly opposes any country reaching trade agreements with the US that would sacrifice Chinese interests in exchange for tariff relief, according to a statement from the Ministry of Commerce on Saturday night.
• * "If such a situation occurs, China will not accept it and will take resolute countermeasures to safeguard its legitimate rights and interests," an unidentified spokesperson was cited as saying in response to a media query about recent US trade talks with other nations.
• NZ monthly filled jobs in May increased by 1,689 jobs to 2.346 million jobs.
• Swap rates are 2-3bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is little changed across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
• Today, the local calendar will also see ANZ Business Confidence.

• In a sign that trade tensions and Middle East conflict premiums have diminished for gold, Friday's finish sees gold eyeing its first month on month loss for the year.  
• Where monthly returns have typically been stellar, last week's fall of -2.7% leaves gold in need of a rally to finish positive for June.  
• Gold has started the trading week in Asia at US$3,277.01 and is on the back foot immediately, down at $3,264.89
• Gold turns its attention to the direction of US interest rates as a big week of data is ahead and the ongoing pressure from the White House continues towards the Fed Chairman.
• Gold has traded below the 50-day EMA for the first time since early April when the US announced global tariffs that sent markets into a spin.  Below gold’s current price is the 100-day EMA of $3,170.85

The overnight range was 144.18 - 144.95, Asia is currently trading around 144.50. USD/JPY traded sideways for most of the Friday session, for the moment no clear direction in the middle of its wider 142.00 - 148.00 range. 

• Bloomberg - “Japan’s Prime Minister Shigeru Ishiba emphasizes the need for speedy measures to ease inflation, while ensuring sufficient funds for social services like medical care, elderly care and pensions. Ishiba opposes cutting the sales tax, while the opposition proposes lowering the consumption tax on food to 0% to combat inflation.”
• (Bloomberg) - “Tokyo’s point person, Ryosei Akazawa, spoke to Commerce Secretary Howard Lutnick twice on Saturday. Taiwan reported “constructive progress”
• The rejection of 148.00 points to a potential top being in place now and shows just how quick the market is to return to selling USD’s. USD/JPY is looking for a fresh catalyst in the middle of its range, while the USD continues to move lower this should see sellers on any bounce for now.
• Price now back in its wider 142.00 - 148.00 range, I am not sure that the brief spike higher would have seen positioning altered too much and the long JPY trade remains alive and well.
• CFTC data shows Asset managers paring back their JPY longs very slightly +93003, while leveraged funds added to their longs again trying to rebuild their position +15935.
• Options : Close significant option expiries for NY cut, based on DTCC data: 143.85($985m), 145.50(845m).Upcoming Close Strikes : 143.85($885m June 30), 145.00($1.02b July 1)
• Data/Event : Industrial Production, Housing starts

Fig 1 : JPY CFTC Data

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