GLOBAL POLITICAL RISK: Trump Agrees To Ceasefire If Strait Opened

• Gold enters the week attempting to stabilize after a volatile period that saw it snap a four-week winning streak. Despite the ongoing Middle East conflict, prices have faced pressure from a resurgent USD and a significant shift in interest rate expectations.
• Last week was a tale of two halves for the yellow metal, marked by an initial geopolitical surge followed by a sharp "risk-off" correction.  This leaves momentum indicators pointing to further weakness.
• Gold ended the week down approximately 2% at US$5,171, marking its largest weekly decline since the start of the year.  
• The week began with a rally to an intraday high of $5,419 as military conflict escalated in Iran. However, prices retreated to settle near $5,160–$5,170 by Friday's close.
• Extreme volatility led some investors to liquidate gold holdings to meet margin calls in equity markets.  
• Surging oil prices raised inflation fears, prompting traders to price in only one Federal Reserve rate cut for 2026, down from two earlier in the week.  
• Heavy selling in bullion-backed ETF trust funds added downward pressure despite the worsening geopolitical backdrop.

ACGBs (YM -14.0 & XM -10.5) are sharply cheaper as oil futures surge, with both Brent and WTI near $110/bbl in latest dealings. This is +18-20% above end Friday levels for both benchmarks. For Brent we are at fresh highs back to 2022 amid the on-going Iranian conflict, with few signs of an off-ramp at this stage.

• On Friday, US tsys finished slightly mixed after whipsawing in early trade after an unexpected decline in February jobs data: a large miss for nonfarm payrolls (-92k vs cons 55k) in Feb after heavy downward revisions of -69k concentrated two months back in Dec.
• Multiple Fed speakers crowded the docket of Friday’s policy blackout ahead of the FOMC Meeting on March 18.
• Cash ACGBs are 10-14bps cheaper with the AU-US 10-year yield differential at +81bps.
• The bills strip has bear-steepened sharply, with pricing -2 to -19 across contracts.
• RBA-dated OIS pricing has firmed sharply, with the probability of a 25bp hike rising from 35% for March to 138% by June and 251% by December 2026.  
• Today, the local calendar will be empty.
• This week, the AOFM plans to sell A$1000mn of the 4.25% 21 October 2036 bond on Wednesday.

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Crude futures have surged at the open, with both Brent and WTI near $110/bbl in latest dealings. This is +18-20% above end Friday levels for both benchmarks. For Brent we are at fresh highs back to 2022 amid the on-going Iranian conflict, with few signs of an off-ramp at this stage. Highs from that period topped out in the $120-$140/bbl region (amid fallout from the Russian invasion of Ukraine). US equity futures are down sharply, off close to 1.7%. This puts Eminis under 200-day EMA support (last near 6630). 

• Risk off is evident through the FX space, with most of the majors down around 0.70% versus the USD. Only CHF is relatively steady at this stage, last near 0.7800. JPY is off over 0.30% to 158.35, but is outperforming higher beta plays and EUR etc.
• US Tsy futures are weaker across the board, the 10yr off -13 to 112.00+. This unwinds all of the post NFP bounce from Friday.