AUSSIE BONDS: Slightly Cheaper, Narrow Ranges, HH Spend Solid

Gold prices are slightly higher today as US 50% steel and aluminium tariffs come into effect. They fell 0.8% on Tuesday. It remains a safe haven asset as trade uncertainty continues. Bullion is 0.1% higher at $3355.7/oz after a high of $3372.67 which followed a low of $3346.57, trading between initial resistance and support. The USD index is up slightly.

• Trade negotiations with the US continue as the end of the 90-day reprieve on July 8 approaches but it remains unclear whether there will be an agreement with Europe and China before then. The OECD revised 2025 global growth down 0.2pp to 2.9% after 3.3% in 2024.
• Equities are generally higher with the Hang Seng up 0.7% and Kospi +2.4% but S&P e-mini down 0.1%. Oil prices are lower with WTI -0.5% to $63.12/bbl, copper is 0.9% higher and silver is down 0.1% to $34.48.
• Later the Fed’s Cook & Bostic and ECB’s Machado appear. The BoC is expected to leave rates at 2.75%. US May services ISM/PMI, May ADP employment and May European services PMIs print. The focus remains on Friday’s US payrolls.

• RES 4: 132.56 High Feb 28 and a key resistance               
• RES 3: 132.03 High Apr 7 and the bull trigger     
• RES 2: 131.72 High May 7 
• RES 1: 131.49 High Jun 3                       
• PRICE: 131.23 @ 05:42 BST Jun 4
• SUP 1: 130.39 May 29 low              
• SUP 2: 129.49/13 Low May 22 / 15 and key short-term support
• SUP 3: 129.02 Low Apr 10 
• SUP 4: 128.60 Low Apr 9 and a key support

A bullish theme in Bund futures remains intact and the contract continues to trade at its recent highs. The latest recovery suggests the move down between Apr 22 - May 15, has been a correction. A continuation higher would strengthen the reversal and signal scope for a climb towards 132.03, the Apr 7 high. Key short-term support to watch is 129.13, the May 15 low. First support lies at 130.39, the May 29 low.

ACGBs (YM flat & XM +0.5) are little changed after today's Q1 GDP release. 

• While Q1 GDP was weaker than expected and slower than Q4, it was impacted by extreme weather events in the quarter, which impacted exports and domestic demand. Thus, there is likely to be some positive payback in Q2 and so a reaction by the RBA to the weakness at its July 8 decision is not assured. Given special factors, it is likely to watch the monthly data closely for signs of a Q2 recovery.
• There was no progress on the productivity front in Q1, with GDP per hour worked posting its second consecutive unchanged quarter, leaving it down 0.9% y/y.
• Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's modest losses.
• Cash ACGBs are flat with the AU-US 10-year yield differential at -19bps.
• The bills strip is little changed.
• RBA-dated OIS pricing is little changed across meetings. A 25bp rate cut in July is given an 83% probability, with a cumulative 79bps of easing priced by year-end.
• Tomorrow, the local calendar will see Trade Balance and Household Spending data.
• The AOFM plans to sell A$800mn of the 1.50% 21 June 2031 bond on Friday.