US TSYS: Tsys Futures Pare Morning Losses, 10yr Yield at 4.50%
- Tsys futures were slightly lower in morning trading, however has since pared losses to trade little changed. TU is -00¼ at 102-26⅞, while TY is unchanged at 109-06+.
- Treasury futures continue to trade below their recent highs. A corrective cycle remains in play and the contract is holding on to the bulk of its recent gains. TY key resistance at 109-10, the 50-day EMA, has been pierced. A clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition remains bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support is 108-06, the Jan 23 low.
- Cash tsys yields initially traded 1-2bps higher this morning, however has since reversed those moves with yields now flat to 0.5bps lower. The 2yr is unch at 4.214%, while the 10yr is -0.4bps at 4.507%, the 10yr has traded in a roughly 10bps range for the past two weeks now, while the 2s10s has flattened about 4bps over the same period.
- US Postal Service is stopping inbound parcels from China and Hong Kong in potentially another sign of worsening trade tensions between Beijing and Washington.
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BONDS: NZGBS: Yields Closed Higher But Slightly Outperformed $-Bloc
NZGBs closed cheaper, with the 10-year yield 4bps higher at 4.46%, the day's high. However, on a relative basis, the NZ 10-year outperformed its $-bloc counterparts, with the NZ-US and NZ-AU differentials closing 1-2bps wider.
- It was offshore factors that drove the local market, with the local calendar light again this week. Tomorrow’s release of ANZ Commodity Prices is the sole release for the week.
- On that front, cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after Friday’s heavy close.
- Swap rates closed 3-7bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 1-4bps firmer for meetings out to July. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.
GOLD: Holding Friday Losses, But Above 20 & 50-Day EMA Support Points
Gold is a touch higher in the first part of Monday dealings, last near $2641. This follows Friday's 0.67% loss, amid a generally supported US yield backdrop and caution from Fed officials around the inflation outlook. Bullion is still up from end 2024 levels ($2624.5).
- US yields have pushed higher today (+1-2bps firmer), although hasn't weighed materially on gold at this stage.
- Spot gold is close to the 20 and 50-day EMA support zones, although the 100-day, which sits near $2600, is arguably more important. We tested sub this support zone on a number of occasions through late 2024 but each time the dip was supported.
- A fresh cycle high in the US 10yr real yield may see gold revisit these lows. On the topside, gold has found selling interest above $2700 since late November.
- Focus will rest on the FOMC minutes and US NFP print later this week.
OIL: Crude Off Intraday Highs, PMIs Released Later Today
Oil prices are off their intraday high to be down slightly during APAC trading today but are still close to the three-month high. Brent rose to $76.89/bbl but is now down 0.1% to $76.47. WTI reached $74.39/bbl before trending down to $73.90. The USD index is down 0.1% but off its intraday low.
- Some Middle Eastern pricing is signalling that demand has picked up from Asia and markets are waiting for prices from Saudi Arabia to confirm this. Crude from sanction-hit Iran and Russia has become scarcer, as sanctions target their shadow fleets.
- The market continues to expect excess supply in 2025 with demand from China likely to remain soft and non-OPEC supply forecast to rise with the risk OPEC+ decides to begin output normalisation. Morgan Stanley is projecting a surplus of around 700kbd this year. But there is a lot of uncertainty surrounding the new US administration and geopolitics.
- Later the Fed’s Cook speaks. US & European December services/composite PMIs and preliminary December German CPI data are released.
