SOUTH KOREA: Futures Rally as Yields Lower Post Cut.
- Korean futures are stronger again today, posting their fourth straight day of gains.
- Korea’s 10YR future is up +.48 at 119.30, following last nights close of 118.82
- The 10YR has broken through the 20-day EMA of 118.34 over the last few trading sessions.
- Korea’s 3YR future is up +.08 at 106.85, following last nights close of 106.77.
- The move sees the 3YR above the converged 20-day and 50-day EMA at 106.72
- Government bonds are stronger again today, with yields lower across the curve with the 10YR leading the rally.
- KTB 10YR is lower in yield by -4.5bps at 2.75%.
- Government bonds had rallied leading into the BOK decision with the KTB 2YR below base rate and the cut in rates sees convergence of the 2YR and the base rate.
- The Korean market can at different times exhibit higher than regional peers correlation to US yields. At a time when US rate expectations are unclear, and very little priced in both the bond market and forwards, the forwards market and the 2YR bond yield will be looking for a catalyst from either domestic economic data or US Federal Reserve to define its next trend.
- If Governors comment that there are 2-3 cuts priced in (including February) is correct, there appears scope for bond markets to re-price leading up to the next BOK meeting on April 17.
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BONDS: NZGBS: Richer With US Tsys, Trump Tariffs In Focus
NZGBs closed 2bps richer, aligning with strengthening in cash US tsys in today’s Asia-Pac session.
- Cash US tsys are dealing 1-4bps richer in today’s Asia-Pac session, with a flattening bias, after finishing Friday mildly stronger.
- US stock futures are dealing lower ahead of key earnings week, with the S&P 500 down 0.8% and the Nasdaq down ~0.50%.
- “In a social media post on Sunday, Trump said he ordered an emergency 25% tariff on all Colombian goods coming into the US, which will be raised to 50% in a week. Oil, gold, coffee and flowers top the list of exports, according to Colombia’s tax authorities.” (per BBG)
- The US Treasury will auction $69 billion of two-year notes and $70 billion of five-year debt later Monday.
- Focus this week is the FOMC policy announcement on Wednesday.
- Swap rates closed 2bps lower after a subdued session given Auckland Anniversary and Australia Day holidays.
- RBNZ dated OIS pricing closed little changed. 47bps of easing is priced for February, with a cumulative 109bps by November 2025.
- Tomorrow, the local calendar will see Filled Jobs.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-36 bond and NZ$100mn of the 1.75% May-41 bond.
CHINA: Futures Jump as Industrial Profit Decline Continues. (Corrected)
{CH} China:
• The PBOC conducted its daily OMO this morning injecting CNY175bn ahead of the Lunar New Year break, just as China data showed that decline in Industrial Profits is now into it’s third year with a decline of -3.3% for December.
• The benchmark 10YR future jumped +0.365 in this morning’s trade to be at 109.405.
• Having edged towards the 20-day EMA last week, today’s moves sees the contract break out above all major technical levels with key levels being 20-day EMA 109.05, 50-day EMA 108.40, 100-day EMA 107.55 and 200-day EMA 106.60.
• China’s 5YR future jumped +0.295 and the 2YR future jumped +0.142.
• The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive and it is likely that the Central Bank will provide liquidity leading into the holiday period which could see the resumption of the upward trend.
CHINA: Futures Jump as Industrial Profit Decline Continues.
- The PBOC conducted its daily OMO this morning injecting CNY175bn ahead of the Lunar New Year break, just as China data showed that decline in Industrial Profits is now into it’s third year with a decline of -3.3% for December.
- The benchmark 10YR future jumped +0.365 in this morning’s trade to be at 109.405.
- Having edged towards the 20-day EMA last week, today’s moves sees the contract break out above all major technical levels with key levels being 20-day EMA 109.05, 50-day EMA 108.40, 100-day EMA 107.55 and 200-day EMA 106.60.
- China’s 5YR future jumped +0.295 and the 2YR future jumped +0.142.
- The Lunar New Year holidays sees China out Jan 28-Feb 04 inclusive and it is likely that the Central Bank will provide liquidity leading into the holiday period which could see the resumption of the upward trend.
- Key data out next week: Industrial Profits Jan 27, PMI’s 27 Jan.
