US TSYS: Equity Declines See Futs Rise as Yields Remain in Tight Ranges
After a slow start to the trading day in Asia and no movement in the first few trading hours, US bond futures rose in the afternoon as regional markets opened and equities fell. The 10-Yr US bond futures rose coincided with the pick up in pace of declines in the NIKKEI and KOSPI, both suffering from an AI / tech sell off.
TYH6 has traded in a 111-18+ to 111-24+ range, and is currently at 111-22+, a gain of +03 today as volumes picked up after lunch. TYH6 remains below moving averages, and seemingly without a strong bias, with daily volumes light and ranges tight.
Cash is better bid, with yields 1-1.5bps lower across the curve, with the 5 and 10-Yr outperforming yet markets yields remain in tight ranges, near to recent highs.
- The 2-Yr is down -0.8bps at 3.549%
- The 5-Yr is down -1.2bps at 3.820%
- The 10-Yr is down -1.2bps at 4.266%
- The 30-Yr is down -1.2bps at 4.907%
Looking ahead to Thursday in the US, focus is on initial jobless claims and the delayed JOLTs openings
Federal Reserve Governor Cook spoke earlier suggesting that progress on reducing inflation has stalled, emphasizing a "wait-and-see" approach to monetary policy with risks tilted towards higher inflation. Cook noted the labor market is "solid" but is monitoring signs of a "two-speed" economy affecting lower-income households.
Thursday sees a US$105bn 4-week and US$95bn 8-week bill auction.
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ASIA STOCKS: AI / Tech Rally Continues, KOSPI Overbought on RSI
A strong overnight lead in from the US and ongoing support for tech names were the key themes that saw equity markets higher in much of Asia today. Key names like TSMC were up +1.2% and Softbank up 2% in the tech space, whilst key Korean names fell today. Chinese tech stocks continue to receive attention given their valuations have lagged other regional peers as investors look to profit on the run up in Korean tech names. Investors throughout the region have seemingly brushed aside the rising geopolitical risks with yet another strong day across major bourses.
- The NIKKEI led the charge today with gains of +1.05% to reach 52,390 and approaching the October high of 52,411.
- The major China bourses are all up today with offshore outperforming. The Hang Seng is up +1.7%, CSI 300 up +1.1%, Shanghai up +1.1% and Shenzhen up +0.8%.
- Korea's KOSPI was up yet again with gains of 1% today and over 6% year to date already on the AI / tech euphoria. The KOSPI is now deep into overbought territory on the 14-day relative strength index, having traded below it for the last part of 2025.
- SE Asia's major bourses were mixed again with the FTSE Malay KLCI down by -0.2%, SE Thai down -0.25% and the Jakarta Composite up +0.3%.
- India's NIFTY 50 continues to do very little given domestic strategists continue to describe it as fully valued as it has opened modestly down today at 26,240 following yesterday's losses of -0.3%
OIL: Crude Lower As Watches Venezuela But Also Supply Trends
Crude is slightly lower today after rising almost 2% on Monday in the wake of the weekend’s news of the US ousting of Venezuela’s Maduro. The development has added more uncertainty to the oil market. WTI is off the intraday low at $57.89/bbl at $58.11 to be down 0.4% today. Brent is down 0.2% to $61.63/bbl. The USD index is 0.1% lower.
- Headlines on Venezuela continued today with President Trump saying that the US may subsidise oil companies’ investment in the country and that using its oil reserves will bring prices down. Oil prices are currently low enough to discourage investment in US shale and so subsidies are likely to be necessary for capex in Venezuela, as well as assurances of political stability.
- Opposition leader Machado said that she would make Venezuela the US’ energy hub but that she hasn’t spoken to Trump since 10 October. The WSJ reported that the CIA advised that it was best to allow the current regime to remain but Trump said that elections will be held at the right time.
- The market continues to focus on the ongoing excess supply problem and inventory data will be monitored. US industry-based figures are out late on Tuesday. The trend is also reflected in Saudi Arabia cutting prices again to Asia for February.
- Later the Fed’s Barkin and Miran speak. US final December S&P Global services/composite PMIs print as well as euro area/UK services/composite PMIs and Spanish/German/French preliminary December CPIs.
JGBS: Slightly Mixed But Cheaper After Weakish 10Y Auction
JGB futures are stronger, +4 compared to settlement levels, but well off the session’s best level following today’s 10-year auction (see chart).
- The 10-year JGB auction delivered weakish results, with the low price failing to meet expectations at 100.00, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.3037x from 3.5913x and the tail lengthened to 0.05 from 0.04.
- This performance came despite an outright yield at a fresh cycle high, around 25bps higher than the level of last month's auction. The 2s/10s yield curve had also steepened further since last month’s auction and sat at around the cycle high.
- BOJ Governor Kazuo Ueda’s hawkish comments yesterday may have impacted today's result at the margin.
- In afternoon Tokyo trading, the cash 10-year is dealing ~2bps cheaper than pre-auction levels at 2.126%.
- Cash US tsys are 1-3bps cheaper in today's Asia-Pac session after yesterday's modest gains. Focus remains on US employment data this week: ADP on Wednesday, Nonfarm payrolls for December on Friday.
- Cash JGBs are slightly mixed across benchmarks, with yield changes ranging from +/- 1bp.
- Swap rates are flat to 2bps higher, with a steeper curve.
- Tomorrow, the local calendar will see S&P Global PMIs: Composite & Services.
Source: Bloomberg Finance LP
