US TSYS: Cash Bonds Slightly Cheaper Ahead Of FOMC Decision
In today's Asia-Pac session, TYM5 is 110-22+, -0-03 from closing levels.
- Yesterday, TYM5 traded 110-14 low/110-29 high, still inside initial technical levels according to MNI’s technicals team: resistance above at 111-25 (Mar 11 high), support below at 110-12.5/110-00 (Low Mar 6 & 13 / High Feb 7).
- Cash US tsys are flat to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session.
- The focus remains on Wednesday's FOMC policy announcement. The majority of analysts expects the FOMC to leave its Dot Plot funds rate medians unchanged in March compared with the December meeting. That would imply the Fed is still pencilling in 50bp of cuts in 2025 (to 3.9%) and 2026 (to 3.4%), with a further 25bp cut in 2027 (to 3.1%).
- Yesterday, projected rate cuts through mid-2025 closed steady to softer vs. yesterday morning’s levels (*) as follows: Mar'25 steady at -2bp, May'25 at -5.4bp ( -6bp), Jun'25 at -18.2bp (-19.7bp), Jul'25 at -26.7bp (-28.7bp).
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ASIA STOCKS: Asia Sees Outflows Across The Region Last Week
Large outflows in Taiwan on Friday, as TSMC dropped 2.75%. India continues to see outflows as we now close in on almost $11b of outflows for the year. There wasn't a single region who saw inflows the past week.
- South Korea: Recorded -$87m in outflows on Friday, bringing the 5-day total to -$154m. YTD flows remain negative at -$1.37b. The 5-day average is -$31m, better than the 20-day average of -$76m but worse than the 100-day average of -$120m.
- Taiwan: Posted -$754m in outflows on Friday, bringing the 5-day total to -$1.09b. YTD flows remain negative at -$3.13b. The 5-day average is -$219m, slightly worse than the 20-day average of -$197m and significantly worse than the 100-day average of -$55m.
- India: Recorded -$253m in outflows on Thursday, bringing the 5-day total to -$1.60b. YTD outflows remain heavy at -$10.86b. The 5-day average is -$320m, close to the 20-day average of -$316m and worse than the 100-day average of -$205m.
- Indonesia: Posted -$36m in outflows on Friday, bringing the 5-day total to -$184m. YTD flows remain negative at -$646m. The 5-day average is -$37m, worse than the 20-day average of -$20m and the 100-day average of -$29m.
- Thailand: Saw +$24m in inflows on Friday, bringing the 5-day total to -$2m. YTD flows remain negative at -$289m. The 5-day average is $0m, better than the 20-day average of -$5m and the 100-day average of -$18m.
- Malaysia: Registered -$25m in outflows on Friday, bringing the 5-day total to -$25m. YTD flows are negative at -$785m. The 5-day average is -$5m, better than the 20-day average of -$26m but slightly worse than the 100-day average of -$27m.
- Philippines: Recorded -$10m in outflows on Friday, bringing the 5-day total to -$43m. YTD flows remain negative at -$129m. The 5-day average is -$9m, worse than the 20-day average of -$2m and the 100-day average of -$3m.
Table 1: EM Asia Equity Flows
JAPAN DATA: Q4 GDP Growth Above Expectations, Consumer Spending Still Slows
Japan's preliminary Q4 GDP was above market expectations. Q3 also saw positive revisions. The q/q annualized outcome was +2.8% versus 1.1% forecast. In q/q terms this was 0.7% (0.3% was forecast, while Q3 was revised up to 0.4% from 0.3% originally reported). In nominal terms, GDP was up 1.3%, also above the 1.2% forecast, with Q3 revised a touch higher. The GDP deflator was 2.8%y/y, in line with market forecasts.
- The detail showed positive surprises for consumption +0.1%, versus -0.3% forecast (Q3 was a 0.7% rise) and net exports +0.7%ppts contribution to growth (+0.4ppt was forecast). Business spending rose 0.5%, which was below forecasts but still above the negative Q3 outcome.
- Domestic and private demand were still down in q/q terms after firm rises through Q2/Q3 of 2024. Both metrics are still up in y/y terms.
- The GDP deflator was up 0.6% q/q, accelerating from the 0.3% gain in Q3.
- The data suggest a fairly resilient economic growth backdrop. It continues to suggest a bias towards further policy adjustments from the BoJ. The slowdown in consumer spending, whilst not as weak as feared, will be a watch point though.
Fig 1: Japan Recorded Positive Growth For 3 Straight Quarters
Source: MNI - Market News/Bloomberg
STIR: RBA Dated OIS Pricing Slightly Firmer Ahead Of Tomorrow’s RBA Decision
RBA-dated OIS pricing is flat to 2bps firmer across 2025 meetings today, led by late-2025 contracts, ahead of tomorrow’s RBA Policy Decision.
- A 25bp rate cut in April remains more than fully priced (118%), while the probability of a cut tomorrow stands at 83%, based on an effective cash rate of 4.34%.
- OIS pricing is mixed compared to pre-Q4 CPI levels on 24 January, with the Aug-25 meeting up 15bps since early February.
- Historically, it would be highly unusual for the RBA to diverge from market expectations, particularly given its lack of any official or unofficial pushback—a stance it has actively taken in the past.
- The last time the RBA defied market expectations by holding rates despite a 75%+ probability of a cut was April 2015, and before that, November 2012. In both instances, the RBA delivered a 25bp cut at the following meeting.
Figure 1: RBA-Dated OIS – Today Vs. Pre-Q4 CPI
Source: MNI – Market News / Bloomberg
