CNH: Trying To Consolidate Break Under 7.1300, Bessent Talks Tariffs/Trade

ACGBs (YM +3.5 & XM +5.0) are stronger after US tsys finished with a modest rally.

• There was little in the way of meaningful fresh drivers but with pre-FOMC positioning and Trump’s continued call for rate cuts (“bigger” than Powell “had in mind”) possibly at play.
• Cash ACGBs are 4-5bps ricer with the AU-US 10-year yield differential at +19bps.
• The bills strip is +1 to +3 across contracts, with a flattening bias.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in September is given a 10% probability, with a cumulative 28bps of easing priced by year-end.
• Today, the local calendar will see RBA Hunter's Fire-Side Chat.
• The focus this week, however, will be on Thursday's August jobs data. Employment is forecast to rise 21k after July's +24.5k with the unemployment rate expected to remain at 4.2%. It will also be important to monitor underemployment, the split between full-time & part-time and hours worked. The RBA is currently expected to leave rates unchanged on September 30 as it waits for Q3 CPI on October 29.
• This week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond on Wednesday and A$1000mn of the 1.00% 21 December 2030 bond on Friday.

In local morning trade, NZGBs are 2-3bps richer after US tsys finished with a modest rally.

• There was little in the way of meaningful fresh drivers but with pre-FOMC positioning and Trump’s continued call for rate cuts (“bigger” than Powell “had in mind”) possibly at play.
• The move started beforehand but won’t have been hindered by a soft Empire manufacturing survey which saw new orders fall 35 points to their lowest since Apr 2024.
• Today will see retail sales and import prices for August in focus, all ahead of the FOMC decision on Wednesday.
• In August, NZ electricity, gas, food, rents, and tobacco prices all rose slightly, while alcohol, petrol, and both domestic and international airfares declined, with diesel recording a small increase. NZ food prices rose 0.3% from a month earlier.
• Swap rates are 2bps lower.
• RBNZ dated OIS pricing is little changed across meetings. 22bps of easing is priced for October, with a cumulative 40bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond and NZ$225mn of the 4.25% May-34 bond.

Gold reached a new record high of $3685.64/oz on Monday as the US dollar softened (BBDXY -0.3%) and Treasury yields were lower ahead of Wednesday’s Fed decision. It is the main event for the week and as a 25bp rate cut is widely expected, the tone of the statement and Chair Powell’s comments will be monitored closely to gauge the outlook for policy. Bullion was 1% higher yesterday at $3678.99 to be up 6.7% this month and is currently around $3678.6.

• Gold’s break above the previous record high of $3674.3 has opened up round number resistance at $3700. The metal remains in a clear bull cycle. Initial support is at $3579.7, 8 September low.
• Geopolitical uncertainty around pressure to increase sanctions on Russia and impose tariffs on those who buy its energy and uncertainty regarding the outcome of attacks on Fed independence are also supporting gold prices. Central banks, especially the PBoC, are also buying the yellow metal.
• Silver was 1.2% higher at $42.681 after a peak of $42.742 and is now up 7.5% in September. It is currently around $42.612, above resistance at $42.606 opening $42.974. Initial support is at $40.195, 20-day EMA.
• Equities were generally stronger on Monday with the S&P up 0.5% and Euro stoxx +0.9% but FTSE down 0.1% and the S&P e-mini is currently -0.1%. Oil prices were higher with Brent +0.7% to $67.47/bbl. Copper rose 1.4%.