T-Bonds Burn, RBA Minutes Next

Bond divergence was a bigger story than just bond weakness on Monday. The US dollar was the top performer while the Canadian dollar lagged. Ashraf took a closer look at the loonie ahead of a speech from Poloz. The RBA minutes are due later.

The direction of the bond market in recent weeks has been a major driver but what was notable on Monday was the divergence. Bund yields were up 2.5 basis points while 10-year Treasury yields were up 9 bps.

This might be the start of a new stage for bonds. In the rout, everything was being thrown overboard but now market participants are looking through the wreckage to decide what's worth keeping. Ultimately, the ECB is still buying 60 billlion euros of bonds per month and that may keep bund yields pinned, at least relatively.

That was the driver Monday as EUR/USD fell to 1.13 from 1.14. Still, it's only one day and the market had little else to chew on. Economic data was limited to the NAHB housing market index at 54 compared to 57 expected.

Greek news continues to improve with Tsipras saying a deal is 'very close' and reports that the EU is ready to compromise.

The focus will shift from New Zealand to Australia in the day ahead. Yesterday, the kiwi plunged on housing curbs; something we warned about in yesterday's IMT. Australian dollar traders will focus on the release of the RBA minutes at 0130 GMT. Many of the views from the central bank were clarified in the Statement on Monetary Policy but this could be another opportunity to warn of downside risks and jawbone.