AUSSIE BONDS: Subdued Data-Light Session, RBA Gov Testimony Tomorrow

The first part of Tuesday trade has delivered further BBDXY index weakness, although losses are modest at this stage, less than 0.10%. The index was last near 1202.15/20, still up from late 2025 lows near 1199. Carry over weaker USD sentiment post Monday's ISM miss, coupled with generally positive risk tones, is in play. US Tsy yields have ticked higher so far today but remain within recent ranges (around 1-2bps higher). This is likely driving some wedge between higher beta and safe haven FX. The likes of NZD, AUD are outperforming JPY so far today. Reinforcing these trends is further gains in precious metals led by silver, while copper also continues to rally. 

• AUD/USD is attempting to break above late 2025 highs (0.6728), last 0.6720/25. The generally positive commodity price/equity market backdrop is helping A$ sentiment. We do have an option expiry at 0.6700, which could still also influence spot. Not surprisingly the technical backdrop is positive, The pair has cleared a key resistance at 0.6707, the Sep 17 high. The breach confirms a resumption of the medium-term uptrend that started Apr 9. This signals scope for an extension towards 0.6759 next, the Apr 11 2024 high.
• It is a similar backdrop for NZD/USD, although this pair hasn't been able to meaningful break above 0.5800 (session highs at 0.5806). We have just under $0.80bn in option expires at 0.5800, which could be influencing spot, but broader risk trends still point to a break higher in the pair. The late 2025 high was at 0.5853.
• USD/JPY drifted a little higher in the first part of trade, but at 156.79 ran out of upside momentum. We were last 156.25/30, down slightly on end Monday levels. AUD/JPY is above 105.00 but just short of 2026 highs.
• EUR/USD is edging up, last 1.1730/35, but remains within recent ranges. GBP/USD is up 1.3560/65, fresh highs back to Sep last year and building on Monday's outperformance.
• Looking ahead we have final PMI (services) reads for the UK and EU. Preliminary CPI for Dec also prints for Germany and France. In the US, the final Dec PMI (services) is also out, while the Fed's Barkin and Miran are due to speak. 

ACGBs (YM +1.0 & XM +1.0) are slightly stronger on 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.
• Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at +61bps.
• The bills strip is slightly weaker, with pricing -1 to -2 across contracts.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 36% for February to 101% by June and 165% by December 2026.
• Tomorrow, the local calendar will see new complete November CPI data. It is forecast to show some moderation but remain above 3%. While the quarterly data on 28 January will be the decisive input into the 3 February RBA decision, the new monthly headline and services have a very close fit with the previous monthly CPI series.
• However, the new trimmed mean will need some time for not only the seasonal adjustment factors to emerge but also the trend as there is currently very limited history. If trimmed mean inflation holds at 3.3% or rises further then the market may bring forward the rate hike priced in for June.

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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.

Bloomberg Finance LP