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• Treasury futures trading weaker, extending lows ahead of the NY open, albeit on light volumes with many plying the sidelines ahead of this morning's data. Otherwise, no obvious headline or block trigger.
• Breaking through Monday session, but not the overnight low, the TYH6 contract currently trades -5.5 at 112-17.5, on volume of 196k.
• Trend theme remains bearish and a break of 111-29 would confirm a resumption of the bear cycle. This would open 111-19, a Fibonacci projection.
• Reminder, ADP weekly NER Pulse has been postponed. ADP announced last week the "NER Pulse won’t publish Dec. 30 because the week ending Dec. 13 corresponds to the reference week of the monthly National Employment Report. Main Street Macro and the NER Pulse will resume publication Jan. 13, 2026."

After clearing key resistance at 0.6707 last week, AUDUSD fails to generate material upside traction, hovering below the level at typing. One driver ahead for the Australian dollar could be a Chinese pivot to a more consumption-based setup looking at a recent MNI policy exclusive as well as subsidy headlines this morning.

• China will expand consumer subsidies, supported by fiscal and monetary stimulus, early in 2026 in order to boost sluggish domestic demand and ensure the economy grows by the targeted 5% next year, according to MNI sources close to policymakers (see here ). A cash-for-clunkers trade-in scheme announced this week shows consumption remains present in policymakers' minds (see here ).  
• For AUD, a broader tilt towards a more consumption-based Chinese economy could have two-sided effects, as the terms-of-trade channel and capital flow channel may counter each other. This comes as higher (consumption-driven) Chinese imports would push up commodity prices and Australia’s terms of trade. However, a resultantly smaller current account surplus would limit any flow toward AUD-denominated investments, that may work against any trade-related AUD gains.
• Analysts generally remain supportive on AUD with AUDUSD on the weaker side of historical ranges, despite strong risk sentiment. BNY Mellon say "AUD holdings are more attractive, and the currency is one of our preferred names for 2026", and Goldman Sachs flag their "baseline scenario for above consensus growth in the US, China, and much of EM should benefit more procyclical G10 currencies like AUD, NZD, and CAD. Domestic factors like stronger activity data and less dovish monetary policy should also support outperformance". However, Scotia comment "AUD delivering textbook bearish outside reversal from local high" on recent price action.
• From a technical perspective, for AUDUSD, to the upside, the 0.6800 handle closely coincides with the July 2024 high, multiple closes last August, and a Fibonacci projection, while to the downside the 20-day EMA intersects at 0.6644.

OI data points to net long setting dominating in net pack terms through the blues as SOFR futures ticked higher on Monday.

• Pockets of net short cover were seen.
• The 10bp uptick in the overnight SOFR fixing reflected year-end turn i.e. liquidity demand as supply becomes less ample during this period (evidenced by an uptick in demand at the NY Feds repo operations) and is expected to fade in early January.