AUSSIE BONDS: Softer Futures, But Sep Highs Still Close, RBA's Hunter Speaks

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.805/960 - High Aug 8 / High Apr 7
• PRICE: 95.735 @ 15:48 BST Sep 12
• SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.720 - 1.0% 10-dma envelope

Aussie 10-yr futures remain above their recent lows, aided by Treasury strength on the weak NFP number and into this week’s Fed decision. To the upside, the next resistance is at 96.207, a Fibonacci retracement point. Initial near-term resistance is seen at 95.805, the Aug 4 high. A break of this hurdle would be a bullish development. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. 

The focus of the week will be on Thursday’s Q2 GDP data release. Bloomberg consensus is in line with the RBNZ’s August forecast of -0.3% q/q bringing the annual rate to flat after declining 0.7% y/y in Q2. 25bp rate cuts are expected at both the October 8 and 26 November meetings.

• BNZ August performance of services is released Monday. It rose 1.3 points to 48.9 in July but has printed below the breakeven-50 level since November 2023.
• August monthly price series including food, electricity, rent, petrol and travel print on Tuesday. Food price inflation has been picking up. There is a risk that Q3 CPI inflation exceeds the 3% top of the RBNZ’s target band. The bank is forecasting 3% for the quarter.
• On Wednesday, Q3 current account data is out and the deficit is expected to narrow to 4.8% of GDP but with it widening to $2.7bn from $2.32bn in Q2.
• There is also Westpac Q3 consumer confidence on Wednesday.
• August trade data are published on Friday. The improvement in the deficit stalled around mid-year.

TYZ5 reopens at 113-05, down 0-04 from closing levels in today’s Asia-Pac session.

• Friday night the US 10-year yield had a range of 4.0280% - 4.0816%, closing around 4.64%. 
• Treasury yields retraced higher on Friday; the long-end led the move(2s10s +3.17 at 50.452, 5s30s -1.11 at 104.534).
• MNI US DATA: U Mich Consumer Sentiment Slips With High Likelihood Of Job Losses. Sentiment surprised lower in the report, at 55.4(cons 58) after 58.2 in Aug.
• MNI US DATA: Little Reaction To Stronger Preliminary U Mich 5-10Y Inflation Expectations. 5-10Y Inflation expectations: 3.9%(cons 3.4) in Sep prelim- after 3.5% in Aug. Previously such an upside surprise for long-term inflation expectations would have sparked a market reaction but not this time. We suspect that's after August and less so July preliminary readings were marked lower in the final.
• 10-Year Yields found some supply around 4.00% and have retraced a little as the market looks towards the FOMC this week. The first buy-zone is now back towards the 4.20% area where I suspect decent demand should return initially. A sustained break through 4.00% is needed for the focus to then turn towards the 3.80% area.

Fig 1: 10-Year US Yield 2H Chart

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