AUSSIE BONDS: Slightly Cheaper, Subdued Ahead Of US CPI, Jobs Report Tomorrow

JGB futures have shown more of a downside bias post the lunch time break. We were last 142.35, -.22 versus settlement levels. Lows so far in Dec have largely been in the 142.10/20 region, which haven't been tested so far today. 

• US Tsy futures have ticked up, leaving JGB futures underperforming, but this follows last week's outperformance trend from JGBs. US moves in the 10yr space are also relatively modest.
• JGB yields have all ticked higher, with the back end of the curve slightly firmer in yield terms. The 10yr was last 1.066%, up 2.4bps. The 20-40yr tenors were up nearly 3bps.
• It is a similar backdrop in the swaps space, with the 20-30yr tenors closing in up on recent highs, both up nearly 5bps respectively.
• Earlier data was encouraging in terms of higher core machine orders, while the PMIs rose, although manufacturing is still sub the 50.0 expansion/contraction point.
• Tomorrow the data calendar is quiet but we do have 20yr supply. 

NZGBs opened the session cheaper and have moved very little throughout the session, yields have closed 1.5bps to 2.5bps cheaper, with the curve bear-steepening. It has been a slow session for APAC rates, with us tsys yields trading just off recent highs, after yields have risen for 5 straight session. 

• New Zealand Prime Minister Christopher Luxon, speaking ahead of Tuesday’s Half-Year Economic and Fiscal Update, acknowledged challenging economic conditions but emphasized careful spending and fiscal adjustments to shorten deficits. He noted encouraging signs of economic improvement but stressed that more work remains to be done.
• Auckland Airport reported a 3% y/y increase in total passenger movements for November, reaching over 1.6m. International passengers rose 3% to 861,532, driven by a 21% surge on East and Southeast Asian routes, supported by increased Chinese tourism. Domestic passenger movements also grew 3% to 771,247. Ytd, total passenger movements increased 2% to nearly 7.7m.
• NZGBs curve has bear-steepened, the 2yr still hovers near yearly lows at 3.758%, up 1.5bps today, while the 10yr is +2.4bps at 4.430%. The 5s10s is 1bps higher at 48.30 and is nearing the yearly highs of 49bps, and almost 40bps steepening since August.
• The OIS market has cooled 2bps to 41bps of cuts priced in for the Feb meeting after hitting a 46bps on Dec 3th. There is a cumulative 107bps of cuts priced in through to October 2025.
• Tomorrow the NZ Treasury will release Half-Year Economic & Fiscal Update, followed by GDP on Thursday

After rising around 1.5% on Friday, oil prices are moderately lower during APAC trading today given lacklustre commodity and equity markets. WTI is down 0.5% to $70.96/bbl, just above the intraday low. Brent is 0.3% lower at $74.24/bbl after a low of $74.18. They were already trending lower before the mixed China data. The USD index is down 0.1%.

• China’s November IP growth was in line with expectations at 5.4% y/y but retail sales printed significantly lower at 3.0% y/y. Authorities have promised more stimulus to boost growth.
• Oil has found support from news that there may be tighter or increased sanctions on some oil producers. The US and its allies may reduce the Russian oil price cap according to Treasury Secretary Yellen. The EU is also looking at further sanctions on Russian oil. In addition, President-elect Trump is expected to tighten sanctions on Iran, which could reduce global output by 1mbd.
• The UAE has announced that it will reduce oil exports at the start of 2025 in an attempt to improve its quota compliance.
• Later preliminary December PMIs for the US and Europe print. The ECB’s Lagarde, Schnabel and de Guindos speak as well as the BoC’s Macklem. The key event for oil markets this week will be Wednesday’s FOMC decision. A 25bp cut is widely expected.