NZD: NZD/USD - Testing Support Below 0.6000 As Risk Turns Lower

NZGBs closed with benchmarks 3-4bps richer after another data-light session. 

• Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after yesterday's modest gains. Focus remains on US employment data this week: ADP on Wednesday, Nonfarm payrolls for December on Friday.
• The local data calendar is very light this week. Next week we get Nov filled jobs, along with food prices as well.
• NZ house prices may rise over the next 12 months after falling for two straight years, according to property consultancy Cotality. Prices fell 1% in 2025 after dropping 2.7% the previous year, and Cotality's home value index fell 0.2% from November to December.
• (Bloomberg) NZ ended 2025 with the highest stock of houses for sale since 2014, according to the nation’s largest property listing website realestate.co.nz. Inventory of properties listed on realestate.co.nz rises 3.1% y/y in December to 30,390.
• Swap closed showing a bull-steepener, with rates 1-3bps lower.
• RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for February, while October 2026 assigns 21bps.

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Bank Indonesia cut rates at three consecutive meetings in Q3 last year but was then on hold through Q4 as the rupiah weakened and its focus returned to FX stability. With the transmission of previous easing to lending rates very slow, the bank feels it can watch and wait. Its next decision is on 21 January and is likely to be on hold given Q1 headline inflation is expected to rise due to fresh food and base effects and USDIDR is trending higher again.

• December inflation printed well within BI’s 1.5-3.5% band but was higher-than-expected with headline up 0.2pp to 2.9% and while core was stable at 2.4% for the third straight month, it is above August’s trough.
• Inflation is unlikely to be a concern to BI but it is likely to be aware of the optics if it cuts rates while it is rising and the rupiah weakening.
• JP Morgan estimates a core CPI excluding gold which softened further in December to 1.2% y/y from 1.3%. Given that global gold prices rose almost 65% over 2025, it has significantly impacted jewellery prices.
• JP Morgan is forecasting BI to be on hold in Q1 with two 25bp rate cuts in Q2 dependent on a stronger rupiah. The drop out of 2025’s electricity discounts from the CPI should drive headline to rise to 4.6% y/y in February 2026.
• Fresh food prices have been boosted by the sharp rise in the take up of the government’s free school meal programme. With the increase in funding for the programme in 2026, JP Morgan sees a risk that it could “contribute to sticky food inflation this year”.

The 10-year JGB auction delivered weakish results, with the low price failing to meet expectations at 100.00, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.3037x from 3.5913x and the tail lengthened to 0.05 from 0.04.

• This performance came despite an outright yield at a fresh cycle high, around 25bps higher than the level of last month's auction.
• The 2s/10s yield curve had steepened further since last month’s auction and sat at around the cycle high.
• That said, BOJ Governor Kazuo Ueda’s hawkish comments yesterday may have impacted today result at the margin.
• In early afternoon Tokyo trading, the cash 10-year and JGB futures are dealing modestly cheaper. 

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