AUSSIE BONDS: Futures Uptick Faded, Yields Firmer, But Sub Post CPI Highs

Oil prices have unwound earlier losses following EIA data showing US crude and product builds in the week to 19 December. It has found support during today’s APAC trading from ongoing geopolitical risks after Russia put into doubt a peace deal over an alleged attack on a presidential residence, the US announced a strike on docks in Venezuela as its blockade continues and said it would attack Iran again if it resumed its nuclear programme. All are oil exporters. 

• WTI has broken back above $58/bbl after it fell to $57.60. The benchmark is currently slightly lower at $58.05, close to the intraday peak of $58.15. The Brent February contract is flat at $61.92/bbl after reaching $61.99. Trading volumes in the contract are very light as it expires today.
• The EIA reported delayed US inventory data for the week ending 19 December. It showed a stock build of 0.4mn barrels which followed two consecutive drawdowns. Distillate inventories rose 0.2mn and gasoline 2.86mn, 6th straight weekly increases. Refinery utilization fell 0.2pp to 94.6%, 2.1pp higher than the same time in 2024.
• A Bloomberg survey showed that Saudi Arabia is expected to cut prices to Asia in February by up to 40c/bbl but may also leave them unchanged. January’s premium was reduced 40c/bbl. Ongoing OPEC and non-OPEC excess supply is pushing prices lower.
• Later the December FOMC minutes are published. In terms of data, US 13 December ADP employment, December MNI Chicago PMI, December Dallas Fed services and October house price data print. Also preliminary December Spanish CPI data are released.

NZGBs closed showing a bull-flattening of the 2/10 curve, with benchmark yields 2-6bps lower.

• The NZ 10-year outperformed ACGBs by ~6bps, with the differential returning to within striking distance of its cycle low of ~-40bps.
• Cash US tsys are slightly richer in today’s Asia-Pac session before the release of the Federal Reserve’s meeting minutes later Tuesday. The Fed will release minutes of its Dec. 9-10 meeting, where the central bank lowered the policy rate by 25bps. Fed Governor Stephen Miran voted against the decision in favour of lowering rates by twice as much.
• Swap rates closed 4-7bps lower, with tighter implied swap spreads.
• RBNZ-dated OIS pricing is slightly softer across meetings. No tightening is priced for February, while October 2026 assigns 23bps.
• The local calendar will be empty until Cotality Home Value data on January 1.

Bloomberg Finance LP

Thin volumes related to the current holiday period are amplifying moves in precious metals, especially silver which is a significantly smaller market than gold. This and year-end positioning is likely driving current volatility. Silver rose over 10% on Friday and then fell around 9% yesterday on profit taking and is up 3.2% so far today. The BBDXY USD index has range traded and is flat as are US yields. 

• Later the December FOMC minutes are published. If they show a more dovish shift, then non-yield bearing precious metals are likely to rally. The USD OIS market has 21bp of easing priced in by the April meeting and 56bp by September.
• Both gold & silver remain in overbought territory while technicals signal that corrections remain corrective.
• Gold is up 0.7% to $4362.5/oz in today’s APAC session, close to the intraday high at $4369.2. It fell to $4323.86 early in trading.
• Silver continued its sell off early in trading to a low of $71.163 but then trended higher and is now up 3.2% to $74.45 just off today’s peak of $74.625. It breached $70 last week and has remained above it since finding support at this level on Monday.
• The CME decision to increase the cash held to back precious metals futures positions was a “normal review of market volatility”, according to DJ. Positions were liquidated on Monday where the cash wasn’t available to meet the new requirements.
• In terms of data, US 13 December ADP employment, December MNI Chicago PMI, December Dallas Fed services and October house price data print. Also preliminary December Spanish CPI data are released.