JPY: USD/JPY - Probing Above 160.00 Again As The USD Finds A Bid

US 10yr futures have spent little time away from 108-11/12 area after gapping higher at the open. This followed the sharp dip in oil futures at the open (currently off around 5% for Brent), as Trump averted further strikes on Iran and said talks would be held Monday afternoon US time. It also follows Friday's brief move sub 108 in 10yr futures. The broader medium term technical trend for futures still looks lower. Cash UST yields are around 3.5-4.5bps weaker, with the front end leading the move. The 10yr yield was last near 4.695%. The yield tapped 4.7450% on Friday, highest since mid-Jan 2025. Prior to that brings mid-Oct 2023 high of 4.9898% into focus. For the 2yr we are still some distance from late July highs (near 4.37%), last around 4.25%.

• Outside of oil moves and US-Iran hopes, headlines have also crossed around US-Japan intervention efforts and sharp JPY swings. From a UST standpoint, the US authorities will be looking to minimize fallout from any UST induced selling from the Japan side. Via BBG: " Treasury Secretary Scott Bessent’s championing of a Federal Reserve facility Japan can use to boost the yen comes with the benefit of protecting the US bond market from excess sales. The Foreign and International Monetary Authorities Repo Facility enables overseas central banks to use their Treasury holdings as collateral to access dollars, rather than sell the bonds on the open market to raise cash".
• Look Ahead: Monday’s calendar highlight is US ISM manufacturing, before Treasury borrowing estimates cross late Monday. Quarterly refunding is then due on Wednesday, while US employment is scheduled Friday.

JGB futures are holding weaker, last 126.68, -.39 versus settlement for the Sep future. This keeps the downtrend firmly intact from a technical standpoint, with the market happy to fade upticks. Cash JGB yields are firmer, led by the front to mid part of the curve, around 2-4bps higher. The 40yr yield is down around 3bps. News flow has been dominated by FX intervention headlines and further surges in the yen. Still, focus is shifting to whether urgency around shifting the weaker yen trend will extend to earlier BOJ rate hikes. OIS markets now see close to  46% chance of a Sep 25bps rate hike, slightly up on Friday's 41% level (which rose post the BoJ). 

• The 10yr yield is edging up, last +2bps to 2.825%. 1-4yr tenors are 2-4bps higher, with the 2yr yield printing fresh highs since 1995 in the first part of trade. The 405 is off 3bps to 4.01%. The 2/30s curve is flatter to 244.5bps, off recent highs off +250bps. The more hawkish BoJ bias likely aiding recent moves.
• Looking ahead, on Wednesday we get June labour cash earnings. Tomorrow delivers 10yr supply as well.

Aussie bond futures have held softer today, but ranges have been fairly tight with Sydney out due to the bank holiday. 10yr futures were last 94.985, down 5.5bps. The range so far today has been 94.965-95.04. For the 3yr we were last around 95.47/48, off 3.5bps (with a 95.45-95.51 range so far today). Like elsewhere, this keeps recent ranges for futures intact. The sharp dip in oil futures/higher UST futures backdrop, likely helping contain downside so far today. 

• July’s Melbourne Institute inflation gauge signals that the moderation in price pressures may have stalled at the start of Q3. The gauge rose 1.0% m/m bringing the annual rate to 4.0% after June’s 3.9%, which had been the lowest since the onset of the Iran War.
• Looking ahead, ANZ job ads for July are released on Tuesday. Vacancies have been trending lower since the start of the Iran War as heightened uncertainty and elevated fuel prices weigh on hiring plans.