IRAN: UK Reports Container Ship Approached & Fired Upon By IRGC Near Oman

TYM6 is dealing at 110-10+, -0-05+ from closing levels in today's Asia-Pac session.

• Cash US tsys are 3-4bps cheaper in today's Asia-Pac session after Friday's heavy session.
• US tsys finished Friday's session 10-13bps cheaper as risk unwinds on the back of US/Iran war related headlines. Initially from the WSJ: "The Pentagon is sending three warships and thousands of additional Marines to the Middle East".
• CBS report followed later in session: "Pentagon officials have made detailed preparations for deploying U.S. ground forces into Iran, multiple sources briefed on the discussions told CBS News."
• Statements from Trump after the bell on Friday didn't help: "TRUMP SAYS HE DOESN'T WANT A CEASEFIRE WITH IRAN" .. after stating "I THINK WE'VE WON .. FROM A MILITARY STANDPOINT IRAN IS FINISHED" - BBG.
• "The U.S. Treasury is hitting the market with a massive sequence of auctions to fund the deficit and Iran war: Tuesday: $69 billion in 2-year notes; Wednesday: $70 billion in 5-year notes; and  Thursday: $44 billion in 7-year notes" - Special Situation Research via X

The BBDXY has had a range today of 1210.22 - 1212.96 in the Asia-Pac session; it is currently trading around 1212, +0.10%. The BBDXY lifted back off the 1203-1205 support as a quick resolution for the conflict was very quickly walked back. The moves in Global Bond yields look particularly alarming and stocks are beginning to play catch up to what this move is telling them, the USD should benefit in this environment. I am not very optimistic going forward about the risk backdrop and the longer this conflict goes on the larger the consequences become, especially for the likes of Europe and Japan. On the day, I still prefer fading dips as the BBDXY chops around within this 1195-1215 range and uncertainty dominates. The USD has still not broken higher throughout this geopolitical mess, but I would be skewed for another test higher as risk sentiment starts to really roll over. A sustained move back above 1215-1217 could signal another test of the 1230-1235 area. 

• EUR/USD -  Asian range 1.1537-1.1565, Asia is currently trading 1.1550. The pair stalled toward 1.1600 but its pullback was minor relative to others as risk starts to break some pivotal levels lower. The pair remains above its pivotal support toward 1.14-1.15 for now, I still prefer to be fading bounces as the headwinds for risk grow and Europe looks to be in the epicenter of the global supply issues. On the day, I suspect we see sellers again back toward the 1.1620-1.1650 area, initial support is in the 1.1500-1.1530 area. A sustained break below 1.1500 and the market will again be looking to test the important 1.1400 area. Lots of Optionality around the 1.1500 area has kept us pinned recently.  
• GBP/USD - Asian range 1.3304-1.3343, Asia is currently dealing around 1.3320. GBP quickly reversed lower as hopes of an offramp from the conflict very quickly faded. The pair is back testing the important 1.3250-1.3300 area. The GBP is trying to put a top potentially in place, I prefer to be skewed to fade rallies while risk continues to trade on the backfoot. On the day, the pair looks to be in a choppy 1.3250-1.3450 range as the bears look for confirmation with a sustained move back below 1.3250.
• Data/Events: ECB’s Escriva speaks, Fed’s Miran speaks, Eurozone March Consumer Confidence, ECB’s Cipollone speaks, ECB’s Lane speaks, Ursula von der Leyen visits Australia (through Wednesday)

Fig 1: GBP/USD Spot Daily Chart

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

JGB futures are weaker, -36 compared to settlement levels, but well off session cheaps.

• The local calendar has been empty today as trading resumed after Friday's holiday.
• Cash US tsys are 3-4bps cheaper in today's Asia-Pac session after Friday's heavy session.
• "Japan is considering a reduction in buybacks of inflation-linked government bonds as investor demand swells amid rising inflation expectations, two sources familiar with the matter said on Monday. Against that backdrop, the finance ministry is weighing a plan to cut its buyback amounts, with purchases of 15 billion yen ($94.11 million) each planned for April and June, said the sources, who declined to be identified as the matter is private." - RTRS
• Cash JGBs are 2-3bps cheaper across benchmarks, but well off the session's cheapest levels. The benchmark 40-year yield is 1.4bps higher at 3.775% ahead of tomorrow's supply.
• Swap rates are 2-3bps higher.
• Tomorrow, the local calendar will see National CPI, Department Store Sales and S&P Global PMI data alongside 40-year supply.