AUSSIE BONDS: Smooth Digestion Of Mar-36 Supply With More Demand

Japan Q2 GDP revisions were stronger than expected. Headline Q2 GDP rose 0.5%q/q, against a 0.3% expectation (which was the initial print). Nominal GDP rose 1.6%q/q, against a 1.3% forecast. The y/y deflator was unchanged though at 3.0%.

• In terms of the detail, private consumption growth was revised up to 0.4%q/q from 0.2%, but capex was revised to 0.6%q/q growth (from 1.3%). The inventory contribution was flat, versus an initial -0.3pt drag. Exports contribution was unchanged at 0.3%pt.
• It's also likely that public investment improved versus initial estimates. Our policy team noted last week: "Public investment is expected to be revised to flat on quarter from the initial -0.5%."
• The revisions are welcome from a broader growth standpoint. We have now had 5 consecutive quarters of growth (albeit with Q1 only marginally positive at 0.1%q/q).
• The authorities will be hoping that this trend is sustained, with near term focus on the tariff fallout. Its impact on profitability/capex is a BOJ watchpoint, with the next Tankan survey, out at the start of Oct, to help gauge impact. 

TYZ5 is trading 113-09, down 0-03+ from its close. 

• The US 2-year yield opens around 3.522%, up 0.01 from its close.
• The US 10-year yield opens around 4.09%, up 0.02 from its close.
• MNI INTERVIEW: Fed To Cut Faster After Weaker Jobs - William English. "There's no doubt the labor market report was soft, and that causes them to lean in the direction of easier policy," he said in an interview Friday. "It leans in the direction of easing policy further, faster than maybe the Fed had been inclined to."
• Holger Zschaepitz on X: "The real surprise came in the revisions: BLS revealed that the US economy lost 13k jobs in June, marking the first monthly decline in employment since Dec2020. That also means the 53mth streak of continuous job growth ended in May; a major turning point for the US labor market.”
• Bob Elliott on X: “Labor market weakening needed to get the cuts so many want also means that  growth is far weaker than what's currently priced in.”
• 10-Year Yields have broken through its support as the market reacts to a labour market that is rapidly cooling. This move should now see buyers return on bounces with the first buy-zone between 4.15%-4.20%. First target the 4.00% zone then the 3.80% area.
• Data/Events: NY Fed 1-Yr Inflation Expectations, Consumer Credit

Gold prices jumped on Friday following disappointing August US labour market data. They reached a new record high of $3600.16 and finished up 1.2% to $3586.69/oz to be 4% higher on the week. Bullion rose to $3596.51 early in Monday’s trading and is now around $3593.5. It continues to find support from rate cut expectations and the market now has over 25bp priced in for September. The US dollar fell (BBDXY -0.4%) and yields were substantially lower.

• Gold remains in a clear bull cycle after it reached a new record high and breached resistance at $3500.1 last week. Initial resistance is at $3578.5, 3 September high, and support at $3470.3, 2 September low.
• US jobs rose 22k in August, less than expected, with both the unemployment and underutilisation rates rising.
• Gold has now been officially excluded from US tariffs.
• China’s demand for gold remains robust with the PBoC buying in August for the 10th consecutive month.
• Silver underperformed gold last week rising 3.2%. It was up 0.8% to $41.004 on Friday after a high of $41.417 following the US payroll data. It has started today around $40.90. The metal remains in a bullish trend with initial resistance at $41.467. The 20-day EMA is at $39.190.
• Equities sold off with the S&P down 0.3% and Euro stoxx -0.5% but the S&P e-mini has started today up 0.2%. Oil prices fell sharply with WTI -2.4% to $61.97/bbl. Copper was down 0.3%.