JGBS: Futures Uptick Overnight With US Tsys, Light Local Calendar
In post-Tokyo trade, JGB futures have upticked, +2 compared to settlement levels, after the US Treasury curve bull-flattened following Monday’s holiday, as market focus remained on Trump administration policies post-inauguration. US yields ended 1-5bps lower.
- Offshore data was limited: the January Philly Fed non-manufacturing survey was soft, and Canadian CPI came in below expectations.
- With 2025 Fed rate cut expectations fairly static (and the FOMC is in its pre-January meeting blackout period), the US tsys short end remained anchored.
- Wednesday's US data calendar remains light, with MBA mortgage data and the December Leading Index - more focus will be on $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.
- Today, the local calendar will see BoJ Rinban Operations covering 1-25-year JGBs.
- BoJ Policy Decision is on Friday, with a 25bp hike expected. A hike will put the BoJ's key rate at 0.5%, its highest level since 2008.
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AUSSIE 10-YEAR TECHS: (H5) Soft Close
- RES 3: 96.975 - High Mar 14
- RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- PRICE: 95.540 @ 16:38 GMT Dec 20
- SUP 1: 95.460 - Low Dec 20
- SUP 2: 95.275 - Low Nov 14
- SUP 3: 94.734 - 1.0% 10-dma envelope
Aussie 10-yr futures slipped further into the Thursday close, undermining early December strength. This works against the previous short-term bull cycle. A continuation higher would refocus attention on resistance at the 96.207 level, a Fibonacci retracement. On the downside, a stronger bearish reversal would instead expose 95.275.
BONDS: NZGBs Open Richer, Tracking US Tsys Yields
NZGBs yields have fallen in early trading, following US Treasuries after the Federal Reserve’s preferred inflation gauge came in below estimates. US Tsys yields fell after PCE in November increased 0.1% from October and 2.8% from a year earlier, both levels slightly below consensus forecasts with the monthly advance the slowest since May.
- The NZGB curve has steepened over the past week, as long-end yields underperform. 1yr-5yr tenors are trading richer over the past week, while the 30yr trades 10bps cheaper. Most of the weeks moves came following the much softer than-expected NZ GDP data with 3Q GDP coming in -1% vs an estimated -0.2%, while 2Q GDP was revised to -1.1% from -0.2%.
- NZGB are richer this morning, with the 2yr -0.6bps at 3.673%, the 10yr is -4.2bps at 4.488%. The 3s10s curve is now at its steepest levels for the year, at 79.40.
- Swaps are trading 1-5bps lower this morning
- RBNZ dated OIS is holding steady to start the week with 53bps of cuts priced for the Feb meeting. There is another full cut priced at the April meeting, with a cumulative 83.5bps of cuts being priced with the market pricing in 4 cuts by May. There is a total of 122bps of cuts priced through to November 2025.
- The NZD is the worst-performing G10 currency year-to-date, down 10.56% against the USD at 0.57. It has underperformed the BBDXY by 17.47% for the year.
- There is nothing else on the New Zealand Calendar for the rest of the year. NZGBs yields will likely be driven by global events and US tsys yields.
CNH: USD/CNH Holds Below 7.30, Medium Term Lending Rates Due, Equities Heavy.
• The USD/CNH dipped below 7.3000 last week, following CNY fixing bias evidencing that the authorities are looking to depreciate the yuan gradually.
• For USD/CNH Friday’s high of 7.3140 look unlikely to be tested today, and the 20-day EMA continues to rise, currently at 7.2757.
• CNH/JPY surge last week following BoJ’s mixed message on rates, the pair get to 21.59 on Friday, just shy of Nov highs above 21.61. It has however fallen since then to be 21.46 in this morning’s trading.
• We await the decision on the 1-Year Medium Term Lending Rate and Volume announcement, where there is no expectations for a cut in the rate from 2.00%, with greater emphasis on the amount the facility is being utilized.
• Friday saw Hang Seng, CSI 300 and Shanghai down, whilst Shenzhen finished up, while onshore CGB yields resumed their rally with the 10-year finishing at new lows of 1.71%.
