BONDS: NZGBS: Bear-Flattener To End A Heavy Week
NZGBs closed showing a bear-flattener, with benchmark yields flat to 5bps higher.
- NZGBs relative performance was mixed, with the NZ-US 10-year yield differential 3bps lower but the NZ-AU differential 1bp higher.
- Cash US tsys are flat to 1bp richer, with a steepening bias.
- (Bloomberg) “New Zealand’s economic recovery probably lost momentum in the final months of 2025, highlighting its fragile nature even before any impact from the spiraling Middle East conflict and surging oil prices. Economists at the nation’s four biggest banks have cut their GDP forecast, with all now seeing it growing by less than the Reserve Bank’s 0.5% prediction, citing a stuttering recovery.”
- Swap rates closed flat to 6bps higher, with the 2s10s curve flatter.
- RBNZ-dated OIS pricing closed flat to 4bps firmer across meetings with late 2026 / early 2027 leading. No tightening is priced for April, while December 2026 assigns 59bps.
- Over the past week, interest-rate expectations across the $-bloc through December 2026 have firmed further in response to the Middle East conflict and its impact on oil prices, with moves led by the Canada (+28bps), followed by the US (+19bps), New Zealand (+14bps) and Australia (+11bps).
- On Monday, the local calendar will see the Performance Services Index and Card Spending Retail data.
Bloomberg Finance LP / MNI
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CHINA: CPI Misses With LNY Distortions
- CPI YoY in January rose just 0.2%, missing the consensus forecast of 0.4% and down from 0.8% in December. The MoM edged up 0.2%, matching the December pace but falling short of the 0.3% forecasts. Core CPI slowed to 0.8% YoY, down from 1.2% driven by base effects and food prices.
- PPI remained negative, reflecting continued pressure on industrial profitability. Down 1.4% YoY, it was an improvement over December's 1.9% decline. However this is the 40th consecutive month of declines, reflecting weak domestic demand and overcapacity in manufacturing.
- Calls for monetary policy intervention remain with the PBOC pledging in its latest quarterly report to employ “flexible and efficient” cuts to interest rates and RRR to maintain an accommodative financial environment emphasizing a deepening coordination with fiscal policy to lower financing costs and boost domestic demand, according to Shanghai Securities News. Undoubtedly expectations will grow ahead of the National People's Congress in March.
- China bond futures are up modestly, the 10-Yr up +.06 at 108.53 and the 2-Yr flat at 102.47. The 2-Yr NDIRS has broken below major moving averages and could test the December lows.
- CGB 10-Yr is modestly lower in yield at 1.80% following liquidity injections this morning during the OMO.
- Look for further liquidity support ahead of the LNY and the 10-Yr to test below 1.80% .
CNY 2-Yr NDIRS vs 20, 50, 100 and 200-day EMA
source: Bloomberg Finance LP / MNI
EUR: EUR/USD - Consolidating Gains Above 1.1900 Heading Into US Employment
The EUR/USD range overnight was 1.1887 - 1.1929, Asia is currently trading around 1.1905. The pair is consolidating around 1.1900 as the USD comes back under pressure and we await US employment data tonight. Price action has been pretty constructive after the initial sell-off and the support just below 1.1800 proved to be solid, can it now build some momentum from that base ? On the day, the first support is back toward the 1.1860-1.1890 area and then 1.1770-1.1800.
- MNI BRIEF: ECB Villeroy: Downside Risks A Little Stronger. In an interview with Les Echos published Tuesday, Villeroy said that ECB monetary policy was in a "good place" but that did not mean the current policy stance was either comfortable or fixed, noting that "risks to the downside for price developments nevertheless seem to me to be a little stronger than the risks to the upside".
- Options : Closest significant option expiries for NY cut, based on DTCC data: 1.1825(EU1.22b), 1.2000(EU2.17b). Upcoming Close Strikes : 1.1800(EU2.68b Feb 13), 1.1850(EU3.89b Feb 13), 1.1950(EU2.36b Feb 13) - BBG
- The EUR/USD Average True Range for the last 10 Trading days: 67 Points
Fig 1 : EUR/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUD: A$ Breaks Through 0.7100, Hauser Remarks & Cross Asset Trends Aid Move
AUD/USD is through 0.7100, for the first time since 2023. The move looks to be a combination of RBA Hauser remarks (will do what it takes to bring inflation back to target), broader risk trends also helping. US equity futures moving further into green, while gold and silver also ticking up as well. Note the following upside resistance level. 0.7158 High Feb 2 2023.
