AUSSIE BONDS: Cheaper & At Session’s Worst Levels Ahead Of US CPI Data

• Not surprisingly it has been a quiet session for Tsys with cash trading closed with Japan out. Short-end tsys futures have broken below Friday's lows, however ranges have remained tight. TU has traded sideways since this morning, last -00⅞ at 102-15+, while TY is -04+ at 107-08.
• There was a decent flattening across curves on Friday, with the 2s10s dropping 4.5bps to 38bps, while the 5s30s & 2s30s both fell about 10bps. The 10yr closed at 4.759%, breaking above the 2024 highs, with sights now on the 2023 highs of 5.01%.
• Former Fed Vice Chair Randal Quarles dismissed concerns over the Fed's independence under Trump, emphasizing its structural resilience to political pressure. He noted that tariffs are unlikely to drive inflation significantly and predicted limited labor market impacts from potential deportations. With US inflation progress stalling and a resilient labor market, the markets are now expect just one Fed rate cut in 2025 and not until October/December meetings.
• Projected rate cuts through mid-2025 have cooled slightly throughout the session vs. Friday morning levels*: Jan'25 at -0.7bp (-1.7bp), Mar'25 -5.1bp (-10.1bp), May'25 -9.2bp (-15.9bp), Jun'25 -16.9bp (-25.6bp), Jul'25 -18.7bp (25.5bp).
• The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.

After getting close to $2700 on Friday, gold sits slightly lower in the first part of Monday trade. We were last sub $2690, off modestly versus end NY levels from Friday. Still, we remain very much in buy the dip mode, with the firmer US yield/USD backdrop post NFP on Friday not upsetting the recent uptrend in bullion. Last week's +1.88% gain was the best since late Nov last year. 

• Working in gold's favor has been more risk aversion emanating from equity markets. US futures continue to track lower in Monday trade so far, down 0.44% for Eminis and 0.60% for Nasdaq futures. The US VIX index tested above 20% on Friday as well.
• A clean break above $2700 could see mid Dec 2024 highs above $2726 targeted. 

The GBP remains on the backfoot, continuing to display volatility/weakness in the Asia Pac time zone. We were last 1.2145/50, off around 0.50%. This is fresh lows in the pair back to 2023. 

• There doesn't appear to be a fresh catalyst for the move so far today, other than carry over weakness from the past week or so.
• In terms of downside targets the MNI technical team note the following:
• SUP 2: 1.2138 Low Nov 2 ‘23
  SUP 3: 1.2087 0.764 proj of the Sep 26 - Nov 22 - Dec 6 price swing
  SUP 4: 1.2037 Low Oct 4 ‘23 and a key support