OIL: Crude Slightly Lower Ahead Of The Fed & EIA Inventory Data

ACGBs (YM -3.0 & XM -3.0) are weaker with US tsy futures (TYH5 at 109-06+, -0-03+ compared to closing levels) ahead of tomorrow’s RBA Policy Decision. Cash US tsys are closed today for the Presidents Day holiday.  

• Tomorrow’s RBA decision takes centre stage, with economists widely anticipating a 25bp rate cut.
• The RBA statement and updated forecasts will be released at 1430 AEDT, with Governor Bullock’s press conference at 1530 AEDT.
• There are also Q4 wages on Wednesday and January jobs data on Thursday.
• The Q4 WPI is forecast to post another 0.8% q/q rise bringing the annual rate down to 3.2% from 3.5% in Q3. January employment is projected at +20k, with the unemployment rate rising 0.1pp to 4.1%.
• Cash ACGBs are 3bps cheaper.
• Swap rates are 3-4bps higher.
• The bills strip is flat to -4, with a steepening bias.
• RBA-dated OIS pricing is flat to 4bps firmer across 2025 meetings today, with Dec-25 leading.
• A 25bp rate cut in April remains fully priced (117%), while the probability of a cut tomorrow stands at 83%.
• AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday. 

• Tsys futures are trading slightly lower today, largely just seen as profit taking after a rally on Friday, while there is no cash trading today with the US out for President's Day. Volumes are not surprisingly well below recent averages, while we remain trading within Friday's ranges. TU is -00⅝ at 102-23¾, TY is -03+ at 109-06+
• 10yr Treasury futures have recovered from Wednesday's low, rising back above the 50-day EMA in the process. Recent weakness resulted in a break of 108-20+, the Feb 4 low. The breach highlights a stronger reversal and most likely the end of the corrective cycle between Jan 13 - Feb 7. A continuation lower would open 108-00, the Jan 16 low, and expose 107-06, the Jan 13 low and bear trigger. Key resistance and the bull trigger is 110-00, Feb 7 high.
• Following the few busy sessions for key economic data last week, fed funds futures are still only pricing in a single 25bps cut this year, currently expected at the September meeting, although pricing has firmed throughout the past week with about a 60% chance the cut will come in June.

NZGBs closed 2-3bps cheaper but at the session’s worst levels. 

• Outside of the previously outlined NZ PSI and Migration data, there hasn't been much by way of domestic drivers to flag.
• The NZ-AU 10-year yield differential closed unchanged at +9bps. It has traded in a -10bps to +20bps since October.
• Cash US tsys are closed for the Presidents Day holiday.  TYH4 is slightly weaker.
• Swap rates closed 3-4bps higher.
• RBNZ dated OIS pricing is flat to 5bps firmer across meetings today, ahead of the RBNZ Policy Decision on Wednesday.
• The RBNZ decision is widely expected to cut rates 50bp again to 3.75%. Revised staff forecasts will also be published.
• All 22 analysts surveyed by Bloomberg are forecasting a 50bp rate cut and the RBNZ shadow board is recommending 50bp of easing.
• Notably, OIS pricing is 2–19bps firmer than pre-Q4 Labour Market data levels from February 4.
• Nevertheless, 49bps of easing is priced for Wednesday, with a cumulative 111bps by November 2025.
• Tomorrow, the local calendar is empty.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% Apr-27 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.