US treasury curve steepened as the front end rallied while the long-end remained under pressure. 30-year yield above 5.50%. The US dollar weakened, with the yen outperforming. Lower oil prices supported risk sentiment

US Treasury yields reversed lower at the end of last week amid whipsaw trading conditions, supported by falling oil prices as investors assessed developments in US-Iran negotiations. The moves buoyed risk sentiment, with the S&P 500 gaining more than 0.5%. Eight of its 11 sectors advanced, led by information technology. The US dollar weakened against most G10 currencies, while the yen outperformed as US and Japanese officials signalled concern about its recent weakness.

Brent crude fell towards US$104 per barrel amid renewed optimism that US and Iranian negotiators could reach a phased agreement to reopen the Strait of Hormuz. The move followed a New York Times report that Iran had offered to resume nuclear talks in exchange for a ceasefire, relief from sanctions on its oil exports, and an end to the US naval blockade. President Trump offered mixed signals, saying he expected negotiations to resume this week despite rejecting Iran’s proposal. Markets remain cautious, however, after repeated diplomatic setbacks and with physical oil markets still tight.

US Treasuries were volatile, with the curve steepening. 2-year yields fell 5bp to 4.86%, while the longer maturities remained under pressure. The 30-year yield rose as much as 5bp to 5.53%, coinciding with a brief rise in oil prices but with few other obvious catalysts. Consumer sentiment data broadly met expectations. 10-year yields also reached a fresh multi-year high above 5.22% before retracing to 5.16%. European bond markets were broadly stable.

August durable goods orders reinforce the picture of strong US business investment. Core orders and shipments point to equipment spending making a solid contribution to third-quarter GDP growth, supporting expectations for robust growth and resilient activity over coming months. The market impact was modest, however, given the volatility of the data.

The yen was the best-performing G10 currency set against the backdrop of a weaker US dollar after Japanese and US officials pushed back against its recent weakness. President Trump raised the issue with Prime Minister Takaichi, who described an undervalued currency as problematic. US Treasury Secretary Bessent also discussed the desirability of a strong yen with Finance Minister Katayama. Katayama said she would continue coordinating with Bessent on foreign-exchange issues

Outside the yen, currency moves were limited. The NZD traded sideways in a narrow range around 0.5665. After gaining above 90 during the local session, NZD/JPY fell below 89, extending its recent choppy price action. CFTC data showed broad US dollar buying in futures markets, likely reflecting higher US yields and recent dollar strength. Speculative accounts recorded their largest weekly sale of NZD contracts in eight years through last Tuesday, although the aggregate position remains close to flat.

The NZ curve closed steeper in the local session on Friday with offshore driving price action in the absence of domestic catalysts. 2-year rates were little changed at 4.12% and only marginally below the 4.14% highs for last week. Meanwhile the pressure at the longer end continued with 10-year rates increasing 4bp to 4.79%. 10-year NZGBs also ended 4bp higher at 5.11%.

Filled jobs is the only domestic release of note today, while the international calendar is quiet. The Pre-Election Economic and Fiscal Update will be the main domestic focus later in the week, alongside business and consumer confidence data. In Australia, the RBA is expected to raise the cash rate to 4.6% on Tuesday, with monthly CPI also due on Wednesday. US labour market data and the Fed’s preferred core PCE inflation measure will be key for global markets, while preliminary euro area CPI is also scheduled.

Stuart Ritson is a senior Strategist at BNZ Markets.