AUSSIE BONDS: Subdued Session, CPI Monthly Highlights Next Week

Oil prices are moderately higher after rising Monday/Tuesday on reports that OPEC is considering a further delay to output normalisation due to begin in April. Brent is flat at $75.85/bbl after an intraday high of $76.07 and WTI is 0.1% higher at $71.90/bbl following a peak of $72.11. The USD index is slightly lower.

• With market attention currently on the supply side, US inventory data out later today is likely to be monitored closely. There has been a substantial crude build since President Trump’s inauguration as flows from Canada rose sharply to beat tariff deadlines. Also, planned refining maintenance may also contribute to higher inventories.
• The US is tightening sanctions against Iran but oil exporters and consumers continue to find ways around them. Bloomberg reported that imports into China of Iranian crude rose 86% m/m to 1.74mbd in February with increased tanker-to-tanker transfers and other terminals. The US is aiming for Iran’s shipments to be under 10% of current levels.
• Chevron’s exports of Venezuelan oil are also being considered by the new US administration.
• Also on the supply side, talks have begun between the US and Russia on Ukraine but a peace is a long way off with Ukraine so far being excluded, Russia not accepting NATO peacekeepers but the US fine with them, and the G7 looking at tightening the current oil price cap on Russian exports.
• A Ukrainian strike on a Russian pipeline is expected to reduce flows from Kazakhstan to the Black Sea by close to a third while repairs are underway, according to Bloomberg.
• Later the FOMC meeting minutes are published and the Fed’s Jefferson speaks. In terms of data, there are January US housing starts/permits, NY Fed February services, UK January CPI/PPI and euro area December current account.

• Whilst the world agonizes about tariffs and their potential impact on their economy, the Vietnamese parliament raised is economic growth target to ‘at least’ 8% in 2025.
• As Vietnam targets double digit growth from 2026 onwards today’s announcement is a meaningful revision of the prior 2025 target of 6.5%-7.0%.
• Inflation is targeted at 4.5%-5.0%, an increase in the upper band by 0.5% with more monetary and fiscal policies to be announced.
• Vietnam has stated publicly that it has ‘no intention of imposing measures that restrict trade with the US’ and that they intend to import more US agricultural products.
• The parliament approved an $8bn railway connecting Haiphong to Lau Cai, running through Hanoi running some 400 kms.  The infrastructure will be financed from the state budget and the issuance of bonds.
• The government announced the construction of the Ninh Thuan nuclear power plant, to be completed by 2030 alongside a significant overhaul of the government with thousands of jobs to go.
• The Vietnamese government 10YR bond yield was at 3.13%, having increased 80bps over the last year. 

ACGBs (YM -1.0 & XM -1.5) sit modestly weaker after today’s release of Q4 Wages data.

• The Q4 wage price index (WPI) rose 0.7% q/q and 3.2% y/y down from the upwardly revised Q3 0.9% q/q & 3.6% y/y. Q4 was in line with yesterday’s updated RBA forecasts and its statement that “wage pressures have eased”.
• The quarterly increase in Q4 was 0.1pp below consensus and the lowest since Q1 2022. However, with productivity growth falling, the RBA pointed out that unit labour costs remain elevated.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session.
• Cash ACGBs are flat to 2bps cheaper, with the AU-US 10-year yield differential at -3bps.
• Swap rates are flat to 1bp lower, with the 3s10s curve steeper.
• The bills strip is little changed.
• The local calendar will see January jobs data tomorrow, with the market expecting +20k and an unemployment rate of 4.1%, +0.1ppt.
• Yesterday, RBA Governor Bullock noted the labour market’s unexpected strength and cautioned that market expectations for further rate cuts are not guaranteed.
• RBA-dated OIS pricing is 1-7bps firmer than yesterday’s pre-RBA levels, with mid-2025 leading the rise.  A 25bp rate cut in April is given an 18% probability, with a cumulative 44bps of easing priced by year-end.