AUSSIE BONDS: Slightly Richer, New Oct-36 Bond Issued, RBA Gov Speech Tomorrow
ACGBs (YM flat & XM +1.5) are slightly stronger but off Sydney session bests.
- Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after yesterday's modest rally.
- Cash ACGBs are flat to 2bps richer with the AU-US 10-year yield differential at -8bps.
- The AOFM announced that the issue by syndication of the new 4.25% 21 October 2036 Treasury Bond has been priced at a yield to maturity of 4.36 per cent. The issue size is $16 billion in face value terms. There was a total of $61.9 billion of bids at the final clearing price.
- (Bloomberg) -- Australia's economy will expand 0.5% in 2Q, according to the latest median estimate from a Bloomberg News survey conducted from July 17 to July 22.
- The bills strip is slightly mixed.
- RBA-dated OIS pricing is slightly softer across meetings today. A 25bp rate cut in August is given a 100% probability, with a cumulative 65bps of easing priced by year-end.
- Tomorrow, the local calendar will see S&P Global PMIs (P) and a speech by RBA Governor Michele Bullock, titled `The RBA’s Dual Mandate - Inflation and Employment' at the Anika Foundation.
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BUND TECHS: (U5) Support Intact For Now
- RES 4: 132.42 2.000 proj of the May 14 - 20 - 22 price swing
- RES 3: 132.00 Round number resistance
- RES 2: 131.95 High Jun 13 and the bull trigger
- RES 1: 131.27 61.8% retracement of the Jun 13 - 16 downleg
- PRICE: 130.76 @ 05:38 BST Jun 23
- SUP 1: 130.17 Low Jun 16
- SUP 2: 130.12 Low Jun 5 a key short-term support
- SUP 3: 129.30 Low May 22
- SUP 4: 128.97 Low May 14 and a reversal trigger
Bund futures remain in consolidation mode and continue to trade below the Jun 13 high. For now, the latest move down appears to be a correction. Key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. This would open 129.30, the May 22 low. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
GOLD: Prospect Of On Hold Policy Sees Gold Fall Despite Geopolitical Risks
Gold prices jumped to $3395.07 at the start of today’s APAC trading, the highest since mid-June, on flight-to-quality following US action in Iran. However, the prospect that the conflict will lead to higher inflation through energy prices thus delaying central bank easing is weighing on non-interest bearing gold with it now down 0.3% to $3357.9 after a low of $3352.1. The stronger US dollar (USD BBDXY +0.3%) and slightly higher US yields are also pressuring bullion.
- Gold continues to trade between initial support at $3338.8 and resistance at $3451.3.
- With positions in gold so long (well above 2016 and 2020 levels), silver and palladium have become safe-have substitutes. Silver is up 0.1% to $36.05 today following a high of $36.20 and a low of $35.84, holding above initial support at $35.43. A bull wave persists with initial resistance at $37.32, 18 June high.
- Middle Eastern developments have driven a pullback in risk with the S&P e-mini down 0.3%, KOSPI -0.5% and Hang Seng -0.1%. Oil prices are higher with WTI +1.7% to $75.09/bbl. Copper is down 0.3%.
- Later the Fed’s Waller, Bowman, Goolsbee, Williams and Kugler as well ECB President Lagarde speak. US and European preliminary S&P Global/HCOB June PMIs are released.
BONDS: NZGBS: Unhanged, Digest Greater US Involvement In Middle East Conflict
NZGBs closed little changed, reversing early modest gains following US airstrikes on Iranian nuclear sites over the weekend.
- Cash US tsys are 1-2bps cheaper in today's Asia-Pac session as the markets digest the possible implications of a longer and more sustained US involvement in the Middle East conflict and how Iran might react to this, potentially blocking the Strait of Hormuz. Today's US calendar: S&P Global US PMI's, Existing Home Sales.
- (Bloomberg) - "New Zealand's dollar is particularly vulnerable in the event of a haven rally in the US currency should the conflict between Iran and Israel pose constraints on oil supply, according to Bank of America Corp."
- Swap rates closed flat to 1bp lower.
- RBNZ dated OIS pricing closed flat to 4bps softer across meetings. 4bps of easing is priced for July, with a cumulative 28bps by November 2025.
- Tomorrow, the local calendar will be empty, ahead of trade balance data for May on Wednesday.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.
