AUSSIE 3-YEAR TECHS: (H6) S/T Net Higher After Recent CPI Vol

• RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
• RES 2: 96.780 - High Jun 26 (cont)
• RES 1: 96.700 - High Sep 12  
• PRICE: 95.845 @ 16:34 GMT Jan 16
• SUP 1: 95.740 - Low Dec 22
• SUP 2: 95.480 - Low 1st Nov ‘23
• SUP 3: 94.932 - 1.0% 10-dma envelope

Prices bounced again on Thursday last week, supported by strength in global bond markets and a smoother inflation picture at the December CPI print. As such, prices edged further away from recent lows. Nonetheless, slower pricing for additional RBA easing - and partial pricing for a return to rate hikes in 2026 - should keep the front-end of the curve under pressure. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 95.480 as the next major support. 

ACGBs (YM -2.5 & XM -3.0) are weaker after cash US tsys finished 2-5bps cheaper on Friday. 

• The coming holiday-shortened week (Monday is MLK Day) will be highlighted by legal intrigue on Tuesday and Thursday, with the US Supreme Court potentially releasing its ruling on the legality of the White House's IEEPA tariffs on its next scheduled opinion day on Tuesday, and oral arguments on Wednesday over whether President Trump is allowed to fire Fed Governor Lisa Cook.
• Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +51bps, near its lowest level since early December. Over the past month and a half, price action had effectively consolidated the differential’s breakout above the ±30bps range that had prevailed since November 2022. This widening has coincided with a steady lift in market-implied expectations for the RBA cash rate.
• The bills strip is -2 to -3 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 28% for February to 91% by June and 147% by December 2026.  
• Today, the local calendar will see Melbourne Institute Inflation Gauge.
• A new 21 October 2037 Treasury Bond is planned to be issued via syndication this week (subject to market conditions).

Bloomberg Finance LP

Earlier headlines crossed that the EU has no plans to deploy counter measures against the US, at this stage, following Trump's tariff plan. To recap, Trump announced on Saturday a 10% tariff on EU countries from Feb 1, which will then rise to 25% in June of this year, for those countries opposing US efforts to acquire/control Greenland. The countries impacted are Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland after they not only voiced their opposition but either sent troops or representatives to the island. 

• EU leaders/ambassadors agreed to continue/intensify diplomat efforts to avoid US tariffs being implemented on February 1. Note that US President Trump is in Davos this Wednesday.
• News Wires are reporting that EU counter measures are being considered though: via RTRS: "The EU's options include a package of its own tariff on 93 billion euros of U.S. imports that was suspended for six months in early August and the range of measures under the Anti-Coercion Instrument that could hit U.S services trade or investments." This proposal was considered ahead of the US-EU reaching a trade agreement last year.
• US Tsy Secretary Bessent noted over the weekend: "Treasury Secretary Scott Bessent amplified President Donald Trump’s message to European allies that the US won’t back down on taking over Greenland, saying the continent is too weak to ensure its security." via BBG. 

• Economic Advisor Hassett stated: "“Right now it’s really a good time for cooler heads to prevail and for us to disregard the rhetoric and get to the table and see if there can’t be deal worked out that’s best for everybody,” Hassett said on Fox News’ The Sunday Briefing." via BBG as well.