MNI ASIA OPEN - Former Officials See More Chinese Easing to Come

NEWS

EU (MNI): "Broad Areas Of Agreement" In EU Debt Talks
European Commission Executive Vice President Valdis Dombrovskis said on Monday "areas of broad agreement seem to be emerging" in talks on overhauling the bloc's rules on borrowing and debt, and that he hoped for a constructive approach in talks as new finance ministers took their posts in several countries.

EUROZONE (MNI): Eurozone Risks Mediocre Growth-Bank Of Greece No. 2
There is a risk gradually tightening monetary policy could stifle eurozone growth just as energy shocks become more frequent due to the green transition, Bank of Greece Deputy Governor Theodore Pelagidis told MNI. "The biggest threat for the eurozone economy is that mediocre growth returns as monetary policy becomes gradually and cautiously less accommodative. Indeed, in an environment of possible, periodic energy-driven, 'green inflation' shocks," Pelagidis said in an emailed comment.

CHINA (MNI): More Fiscal, Monetary Easing Coming In China
China is set to launch further waves of monetary and fiscal easing, including possible cuts of over CNY1 trillion in taxes and fees, as it de-emphasises a campaign to lower leverage in order to support companies facing continuing pandemic headwinds, weak consumption and imported inflation, former National Development and Reform Commission Secretary General Han Yongwen told MNI in an interview.

JAPAN (MNI): New BOJ Policy Options Need A Look
Bank of Japan officials are wary that any announced fresh analysis on the yield curve's impact on capital investment and the yen on an expected widening rate gap with the U.S. Fed may create market confusion on whether it is continuing, or ready to unwind, easy policy now built around a minus-plus 0.25% range for the 10-year bond, MNI understands.

DATA

CANADA (MNI): BOC Says Firms Have Record Views Of Wage & Price Gains
The Bank of Canada reported Monday that companies had record high views on elevated wage and price inflation just before the omicron variant struck late last year, results that may add to the case for raising interest rates. The quarterly Business Outlook Survey of about 100 firms taken Nov. 15 to Dec. 6 showed a record 67% of firms said inflation will exceed 3% over the next two years. That's beyond the central bank's 1%-3% target band for price gains. On wages, 80% of firms expected faster pay increases over the next 12 months.

CANADA (MNI): Canada Home Prices In Record Surge on Supply Squeeze
Canadian home prices rose by a record in December, fueled by an annual record gain in sales coupled with low inventories, a national realtor group reported Monday. Prices rose 27% in December from a year ago in the Canadian Real Estate Association's index, which matches sales of similar properties. The Bank of Canada has warned about signs of more dangerous speculative buying and said overall inflation has been faster than expected. Governor Tiff Macklem has said he may raise a record low 0.25% policy rate as soon as April.

FOREX: Narrow Holiday Ranges, USDJPY Extends Bullish Reversal

• The US Dollar index trades marginally in the green to start the week, as G10 currency ranges remained fairly tight due to the US Martin Luther King holiday.
• USDJPY had a notable 0.35% uptick, extending on its firm bounce off the 113.50 mark during Friday’s session. The move higher in USDJPY coincides with modest strength in equities, with stock markets across Europe all in positive territory.
• The broader trend condition remains bullish and the recent sell-off is likely a correction. Friday’s low of 113.49 marks a key short-term support and note that Friday’s price pattern is a doji - a bullish reversal signal. Attention on the topside is at 114.79, the 20-day EMA.
• A continuation of buoyant sentiment in oil markets has seen both Brent and WTI crude futures further extend above the October’s highs. This lent support to both CAD (+0.34%) and NOK (+0.5%) which were the clear outperformers to start the week.
• Last week’s break of a key support in USDCAD at 1.2621, the Dec 31 low strengthened a bearish case and has opened 1.2448, 76.4% of the Oct - Dec rally. A move through this chart point would signal scope for an extension lower and open 1.2387, the Nov 10 low.
• Overnight, the Bank of Japan decision/statement will be released before UK employment data kickstarts the European session. The focus then turns to German ZEW sentiment figures, which precedes the US Empire State Manufacturing Index.
• UK and Canadian CPI on Wednesday will be the focus this week before the live central bank meetings over the following fortnight.

BOND SUMMARY: Weak Tone With U.S. Out

Core bonds weakened in a US holiday-thinned trading session Monday as equities gained, with Gilts underperforming Bunds. Europe cash yields closed near session highs.

• Yields on the German curve moved higher in parallel; the UK belly outperformed on the curve. Greece underperformed on the periphery.
• Tsy futures fell in overnight Asia-Pac trade but spent most of the rest of the session edging higher, albeit all on low volumes (~360k traded by 1230ET, close at 1300ET), with cash trading closed.
• Focus turns to the BoJ decision overnight and UK jobs and German data Tuesday.

Closing Prices/ Yields / 10-Yr Periphery EGB Spreads To Germany:

• Mar 10-Yr futures (TY) down 13.5/32 at 127-24.5 (L: 127-20.5 / H: 128-01.5)
• Germany: The 2-Yr yield is up 1.2bps at -0.571%, 5-Yr is up 1.4bps at -0.35%, 10-Yr is up 1.6bps at -0.03%, and 30-Yr is up 1.3bps at 0.265%.
• UK: The 2-Yr yield is up 3.3bps at 0.829%, 5-Yr is up 2bps at 0.99%, 10-Yr is up 2.9bps at 1.179%, and 30-Yr is up 3.1bps at 1.286%.
• Italian BTP spread down 0.1bps at 131.8bps / Greek up 5.2bps at 163.2bps