BONDS: ACGB Curve Bear-Steepens, Tracking Moves In Tsys
Aussie bonds saw a bear-steepening move occur today, largely tracking moves made in US tsys. Earlier today we had a 2028 bond auction, followed by Australia Private sector Credit data which was in line with estimates
- Australia's credit to business and consumers increased by 0.5% month-on-month in November, meeting expectations, according to the RBA. Year on year, credit rose 6.2%, up from 6.1% in October. Housing loans grew 0.5% m/m and 5.4% y/y, while consumer credit declined 0.2% m/m but rose 2.1% y/y. Lending to non-financial businesses increased 0.7% m/m and 8.5% y/y.
- There was a 2028 bond action today, the notes drew an average yield that was 1.4bps lower than the mid-rate in the secondary market, signaling strong investor demand
- US tsys are trading steady ahead of the release of US core PCE data, after the Fed signaled concern over the risk of inflation pressure facing the economy
- ACGBs have traded cheaper today, the curve has bear-steepening with the 2s10s +1.5bps at 48bps. The 2yr is trading -0.4bps at 3.978% while the 10yr is +7bps at 4.478% and now trade about 33bps higher than the December lows.
- ACGB futures are currently YM -0.5, VTA -0.55, XM -0.7
- Swap curves are trading +1 to +2bps, with the 2y underperforming
- Bill strip is flat to -6,
- RBA-dated OIS pricing has firmed 2-10bps throughout the week, with 16bps of cuts priced for Feb, or a 63% chance of a cut, the first full cut is now priced in for the April meeting. However the market further out the curve has cooled, with only 67bps of cumulative cuts now priced by December 2025, down from 80bps to start the week.
- Next week we have the RBA Minutes of Dec. Policy Meeting due out on December 2024
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AUSSIE BONDS: Little Changed, RBA Governor Speech Tomorrow
ACGBs (YM -1.0 & XM +0.5) are slightly mixed, with a flattening bias, in today’s data-light Sydney session.
- "Investors such as UBS Asset Management and Jamieson Coote Bonds Pty see value in Australian bonds as the global debt selloff looks stretched and anticipation of a policy pivot grows." (See link)
- The latest round of ACGB Dec-35 supply showed strong pricing, with the weighted average yield printing 0.47bp through prevailing mids. The higher outright yield and steep curve likely aided the absorption of today’s ACGB supply. However, the notable worsening in global bond sentiment likely weighed on demand at today’s auction.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest haven demand-induced gains.
- Cash ACGBs are flat, with the AU-US 10-year yield differential at +16bps.
- Swap rates are little changed.
- The bills strip is slightly cheaper across contracts, with pricing flat to -3.
- RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
- Tomorrow, the local calendar will see a speech by RBA Governor Bullock at the Women In Payments Conference.
FOREX: USD Ticks Higher, USD/JPY Close To 155.00, Aggregate Moves Modest
The earlier outperformance from risk currencies has given way to a firmer USD backdrop as Wednesday trade has unfolded. The USD BBDXY index was last around 1279.15, a touch higher for the session.
- Aggregate FX moves are not large at this stage. USD/JPY has traded with a positive bias, but is yet to break above 155.00. US yields sit close to unchanged, albeit with a slight bias to move higher at the back end.
- US equity futures are off earlier highs but still sit in positive territory, last +0.1%. This comes ahead of the key Nvidia earnings release. Regional equities are mixed, but aggregate moves aren't much beyond 0.50% at this stage.
- AUD and NZD sit off earlier highs, but are only down 0.10% at this stage. AUD/USD last near 0.6525, NZD just under 0.5900. EUR/USD has slipped back under 1.0600.
- We remain within broader ranges though, as markets await fresh catalysts. Technical indicators still suggest USD dips will be supported.
EQUITIES: China & HK Equities Trade In Narrow Ranges Ahead Of Nvidia Earnings
Hong Kong and China equities are mostly higher today, with earlier losses now being erased. China's central bank kept its loan prime rates unchanged, in line with expectations. The HSI is trading flat with losses in Geely Automobile, Xiaomi, and Alibaba offsetting wider gains, while the CSI 300 now trades 0.2% higher. Investors remained cautious ahead of Nvidia's earnings, which could serve as a key catalyst for global sentiment. Meanwhile, Chinese tech stocks faced uncertainty amid geopolitical concerns tied to the next Trump administration.
- China healthcare stocks are the top performing today, the CSI 300 Healthcare Index is 2.45% higher with Tigermed jumping 8%. Small & mid-cap stocks out outperforming large-cap today, with the CSI 2000 up 2.50%, while the CSI 1000 trades 1.60% higher.
- Hong Kong listed equities are trading in narrow ranges today, with major benchmarks trading little changed.
