Oil Eases, Bonds Rally

• Brent crude tumbled 9% to below US$88/bbl after President Trump flagged a possible deal with Iran and the US paused further strikes. Lower oil prices have eased near-term inflation concerns, supporting fixed income markets.
• Global bond yields moved lower, with US 10-year Treasury yields down around 5bps over the past two sessions as oil prices retreated. Markets continue to price a 38% chance of a Fed rate hike.
• Australian government bond yields followed offshore markets lower, with the 3-year falling 10bps to 4.62%. While global markets drove the move, attention remains firmly on domestic inflation and RBA pricing ahead of next week’s CPI.
• US durable goods orders rose just 0.3%, well below the 1.6% forecast, with the softer print in manufacturing data supporting the view that higher rates are beginning to weigh on economic activity.
• RBA Governor Michelle Bullock speaks today, with markets looking for any guidance ahead of next week’s CPI release. Commentary on inflation, wages and household demand will be closely watched for indicators of the RBA’s next move.