AUSSIE BONDS: Strong Rally After Jobs Data, 3/10 Curve Flattener Has More To Run

Oil prices are slightly lower in Tuesday’s APAC session following moderate gains yesterday as risk sentiment stabilised. WTI is down 0.3% to $59.96/bbl but it has spent much of the session below $60. It made a high of $60.12 before moderating again. Brent is 0.2% lower at $63.95/bbl after reaching $64.06. The USD index is up 0.1%, likely pressuring dollar-denominated crude.

• With the support of a number of Democrats, the bill to provide US government funding until 30 January passed the Senate. The House of Reps will vote on Wednesday EST.
• After Saudi Arabia reduced its price premium for shipments to Asia, Kuwait has set December deliveries to Europe at a $2/bbl discount while the US faces a $2.90/bbl premium.
• Attention remains firmly on the expected record 2026 market surplus with the IEA’s monthly report published on 13 November, while its annual outlook, EIA short-term energy outlook & OPEC report are out 12 November. The IEA increased its 2026 surplus forecast in its October monthly report.
• US President Trump said that a US-India trade deal is close which would reduce the average tariff rate. However, Russia’s Interfax reported that India continues to buy Russian crude despite Trump commending them for reducing purchases.
• The US bond market is shut for Veterans Day, which could impact oil trading volumes, but equities will be open. Later ECB President Lagarde speaks. US October NFIB small business optimism, UK labour market data and euro area /German November ZEW print. 

ACGBs (YM -3.0 & XM -1.0) are modestly weaker.

• Cash ACGBs are 1-3bps cheaper, with a flattening bias, in today’s Asia-Pac session after today’s confidence data.
• The details of the November Westpac consumer confidence survey are mixed, signalling that there could be payback in December. It rose despite lower sentiment amongst mortgage holders as a group and less optimism regarding the labour market outlook.
• NAB business confidence and conditions were little changed in October, with the former down 1 point to +6 and the latter up 1 point to +9.
• The bills strip has bear-steepened, with pricing -2 to -4.
• RBA-dated OIS pricing is showing a 25bp rate cut in December at an 8% probability, with a cumulative 14bps of easing priced by mid-2026.
• Tomorrow, the local calendar will see Home Loan data alongside RBA's Jones-Fireside Chat.
• However, the highlight of this week's AUS calendar will be Thursday's October jobs data. The unemployment rate rose 0.2pp to 4.5% in September.
• Last month's weak employment data triggered a solid ACGB rally, but those gains were more than fully reversed after the much hotter-than-expected Q3 CPI report.
• The AOFM plans to sell A$1200mn of the 4.25% 21 December 2035bond tomorrow and A$800mn of the 1.75% 21 November 2032 bond on Friday.

The BBDXY has had a range today of 1218.71 - 1220.57 in the Asia-Pac session; it is currently trading around 1220, +0.10%. The USD has found some support between 1218-1220 and has consolidated here the last couple of sessions. USD/JPY should continue to be well supported but I suspect the USD will be sold against risk currencies like the AUD & NZD and the EUR if this surge in risk sentiment turns into an end of year rally for risk. I am caught undecided on the USD at the moment, I liked the fade into 1230 initially but short term I expect dips back toward 1210-1215 to now be supported first up. We could chop around sideways for a while while the market decides which way to go. Above 1230 and we could start to break higher, below 1205 and the downtrends momentum could be re-engaged.

• EUR/USD -  Asian range 1.1547 - 1.1564, Asia is currently trading 1.1555. The pair continued to build on its support below 1.1500, I suspect rallies will now find sellers toward the 1.1650 area initially. This has been the pivot with the larger 1.1400-1.1900 range over the past few months.
• GBP/USD - Asian range 1.3158 - 1.3181, Asia is currently dealing around 1.3170. The pair continues to build on its bounce off the 1.3000 area. I continue to favor fading rallies though as GBP looks to have put in a medium term top. I suspect the 1.3250-1.3300 area is the place to fade if we see that level again. 
• Cross asset : SPX +0.05%, Gold $4145, BBDXY 1220, Crude Oil $60.01
• Data/Events : EZ ZEW Survey Expectations, Germany ZEW Survey Expectations

Fig 1: BBDXY Spot 2H Chart

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