- The USD was supported early, but softened as the session progressed. USD/JPY made fresh multi month highs, before retracing, helped by a fresh warning on FX moves from the Japan FinMin.
- US cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Cash JGBs have followed suit, aided by a solid 10yr auction. Regional equities are mostly higher, except for Hong Kong markets.
- Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.
MARKETS
US TSYS: Slightly Richer Ahead Of JOLTS & ISM Services Data
TYH5 is 108-18+, 0-01+ from NY closing levels.
- According to MNI’s technicals team, the trend condition in 10-year futures remains bearish. Recent weakness reinforces the current bear cycle - the contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108.00, a Fibonacci projection. Short-term gains are considered corrective below the 109-10+ 20-day EMA.
- Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
- Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
JGBS: Little Changed After A Solid 10Y Auction Supports Market
JGB futures are in slight positive territory, +2 compared to the settlement levels.
- Outside of the previously outlined Monetary Base date, there hasn't been much by way of domestic drivers to flag.
- Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
- Cash JGBs are flat to 1bp cheaper across benchmarks beyond the 1-year but richer than pre-10-year auction levels. The benchmark 10-year yield is 0.2bps lower at 1.134% after dealing as high as 1.143% earlier.
- The 10-year JGB auction delivered solid results, with the low price beating expectations, the cover ratio nudging higher and the tail shortening. Weaker sentiment toward global long-end bonds and expectations of further near-term tightening by the BoJ didn’t appear to weigh significantly on demand.
- The swaps curve has twist-steepened, pivoting at the 10-year, with rates 1bp lower to 3bps higher.
- Tomorrow, the local calendar will see the Consumer Confidence Index alongside BoJ Rinban Operations covering 1-25-year JGBs.
AUSSIE BONDS: Slightly Cheaper, Subdued Session, CPI Monthly Tomorrow
ACGBs (YM -2.0 & XM -1.0) are slightly weaker in a relatively subdued Sydney session.
- Outside of the previously outlined building approvals, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
- Cash ACGBs are 1bp cheaper with the AU-US 10-year yield differential at -14bps.
- Swap rates are 2-3bps higher.
- The bills strip has bear-steepened, with pricing flat to -6 across contracts.
- RBA-dated OIS pricing is flat to 4bps firmer, with late 2025 leading. A 25bp rate cut is more than fully priced by April (108%), with a February cut at a 58% chance.
- November CPI is released tomorrow and is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting the headline to pick up 0.1pp to 2.2%. The trimmed mean was 3.5% the previous month.
- The local calendar shows retail sales and trade balances on Thursday.
- AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.
AUSTRALIA DATA: Private House Approvals Softening
The number of building approvals in November was very weak falling 3.6% m/m after an upwardly-revised 5.2% m/m. The weakness was across both private houses and non-house dwellings with them down 1.7% m/m and 10.8% m/m respectively. Through the volatility total approvals continue to trend gradually higher.
- Total approvals are now up 3.2% y/y down from 6.8% in October with the level still slightly below the Q4 2019 average. While November was soft, the data is volatile and 3-month momentum picked up to its highest in almost 18 months driven by multi-dwellings.
- Private house approvals are up 3.8% y/y stronger than October’s 3.3%. The monthly drop in November was broad based across states, except Queensland. Also 3-month momentum has been trending lower since mid-year, which is concerning given demand for housing remains robust.
- After rising 24.7% m/m in October, it is not surprising that multi-dwelling approvals fell 10.8% in November leaving the annual rate down 6.4% y/y. The weakness was due to NSW and Victoria.
- The value of non-residential building rose 18.4% m/m, while residential fell 0.5%.
Australia number of dwellings approved
Source: MNI - Market News/ABS
BONDS: NZGBS: Cheaper But A Subdued Session, US JOLTS & ISM Services Later Today
NZGBs closed 1-2bps cheaper after a relatively subdued session. In relative terms, the NZGB 10-year’s performance was mixed, with the yield differential to US tsys 2bps wider but unchanged against ACGBs.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
- Today, the local calendar was empty ahead of ANZ Commodity Prices, the sole release for the week.
- Swap rates are 1-2bps higher.
- Swap rates closed flat to 2bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed little changed. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.
NEW ZEALAND: Signs Of Recovery In Housing Market
NZ CoreLogic home values fell 0.2% m/m in December to be down 3.9% y/y after -3.2% y/y. They have not posted a monthly increase since February but the 2024 average level was still 1.3% above 2023’s. There are signs that house prices may begin to rise again in 2025 as mortgage rates fall, new supply remains weak and affordability improves.
NZ home prices y/y%
- Q3 housing affordability recorded the third consecutive quarterly improvement to be up 3.2% y/y, the first annual rise since Q1 2021, but still 30% below trend. While incomes remain weak, the average mortgage rate was down around 90bp on the year in Q4 and house prices fell 3.1% y/y – helping to support a turn in affordability.
- This shift appears already to be supporting a recovery in demand with the REINZ reporting a 10.8% y/y rise in transactions in November and a drop in the number of days to sell to 42 from the 2024 peak of around 50. The median selling price is now up 0.6% y/y.
- Supply also remains constrained with October building consents for new dwellings still soft declining 3.5% y/y 3-month average but not as weak as they have been.
- Housing became more undervalued over the last year with it 12% below trend in Q3 compared with 6% below in Q3 2023, as measured by the ratio of house prices to CPI rents. Valuations should also encourage buyers into the market.
- While more respondents in the Q4 RBNZ household survey continued to expect lower house prices, the share is shifting back towards the neutral 50% level after almost 75% believed they would fall in Q3.
NZ affordability vs valuation % deviation from trend
FOREX: USD/JPY Off Highs On FinMin Comments, A$ & NZD Outperform
The USD BBDXY index sits little changed in the first part of Tuesday dealing. The index last down a touch to under 1304. We are still above intra-session lows from Monday (sub 1300), which after reports that the incoming Trump administration would scale back its tariff plans (which was later denied). Yen and CHF have underperformed, while A$ and NZD have outperformed, leaving markets with a slight risk on feel in the FX space.
- USD/JPY got to multi month highs of 158.42, but sits lower now, last near 158.00 (close to Dec 26 highs - 158.08). Comments from the Japan FinMin around excessive FX moves, prepared to act, tempered upside USD/JPY momentum. However, the remarks don't appear to represent an escalation on what has been said recently by Japan officials.
- A consolidated break above 158.00, could see 159.45 targeted (July 12 highs). Of course this would put us back in the mid 2024 intervention zone. There is also less sponsorship from US-JP yield differentials for this recent move higher in the pair, with yield differentials lower in the 2yr space and sideways for the 10yr.
- AUD/USD is up around 0.20%, last 0.6260, still sub intra-session highs from Monday ( just above 0.6300). It is a similar backdrop for NZD, up a little over 0.30% to 0.5660/65.
- Regional equities are mostly positive, except for Hong Kong/China, following US blacklisting of tech bellwethers, including Tencent. This hasn't impacted broader FX risk appetite though.
- A speech in Las Vegas from Nvidia's CEO, which focused in part on new graphics card, hasn't shifted aggregate US equity futures. We are around flat at this stage.
- US yields have ticked lower, likely leaning some pressure on the USD.
- Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.
EQUITIES: HK/China Shares Lower On US Blacklisting, Tech Firmer Elsewhere
Asia Pac equities are once again mixed. Hong Kong and to a lesser extent China markets, have struggled amid fresh US additions to the Blacklist (for companies that have alleged links to the China military). These have included Tencent and CATL, a battery maker. The HSI is off around 2.0% at this stage, while the CSI and Shanghai Composite indices are down more modestly. Trends are more positive elsewhere in the region, aided by tech trends.
- Nvidia's CEO has been in Las Vegas and announced new computer graphics processors, but broader Nasdaq futures sit little changed, last around flat after a strong cash trading start to the week in Monday US trade.
- Tech sensitive plays in terms of South Korea and Taiwan are firmer but away from best levels. The Taiex still up around 1.0%, the Kospi near 0.65%. Investors may have been hoping for more out of the Nvidia presentation.
- Yesterday saw very strong inflows into local Taiwan stocks, in excess of $1.5bn amid broader tech optimism, as Microsoft unveiled plans for AI data centers and Foxconn posted stronger Q4 results.
- Japan markets are performing better today, up +1% for the Topix, which the Nikkei is around 2% higher. Weaker yen levels, along with positive tech spill over are likely aiding sentiment.
- Elsewhere, aggregate shifts are more modest, Australia's ASX 200 up around 0.30%, but Indonesia and Philippine markets track slightly lower.
OIL: Crude Down Slightly, December OPEC Output Lower
Oil prices continue to hold onto most of last week’s gains and are only down slightly today. They have declined moderately this week following technical indicators suggesting last week’s rally was overdone. WTI is 0.2% lower at $73.42/bbl, close to the intraday high after a low of $73.18. Brent is down 0.2% to $76.18/bbl, also close to today’s peak following a brief move below $76.00. The USD is flat.
- Concerns over excess supply in 2025 persist with both the production and consumption outlooks uncertain. Bank of America has restated that new production from non-OPEC countries is likely to exceed global demand growth. Later today industry-based data on US inventories is released.
- A Bloomberg survey showed OPEC output declining 120kbd in December driven by UAE with moderate increases in Libya and Nigeria offset by cuts in Iran and Kuwait.
- Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.
GOLD: Holding Within Recent Ranges, Simple 100-day Support Zone Intact
Gold is a touch higher in the first part of Tuesday trade. Bullion was last near $2640, up a touch for the session, but remaining well within Monday's intra-session ranges. Dips sub the simple 100-day MA (last near $2626) have been supported in recent months. This is helping keep a modest uptrend in play, but Nov/Dec highs from 2024, above $2700 are still some distance away.
- Cross asset trends have been mixed so far today, with the aggregate USD indices little changed, while US yields are down a touch. Regional equities are mostly higher outside of a Hong Kong drop.
- Onshore China media has highlighted analysts stating that central bank allocation to gold is likely to continue in 2025 (per CSJ, see this BBG link). This has been a key source of support for bullion in recent years.
IRON ORE: Eyeing Mid Nov Lows, Diverging From Resilient Copper Back Drop
The active SGX iron ore contract is back close to mid Nov lows. We were last near $96/ton, having mostly tracked lower since the start of the year. Mid Nov lows were around $95.50 for the active contract. A break sub these levels could see Sep lows near $90/ton targeted from a technical standpoint.
- The softness in iron ore is in line with weakness in China property stocks, with the CSI 300 property sub index back to late Sep lows. Growth concerns continue in China despite recent services PMI beats.
- Iron ore inventories at China ports did tick down at the end of last week, back to levels last seen in May. Still seasonality around inventory levels is that typically stay elevated through the course of the first quarter of the year.
- Onshore steel price futures also remain entrenched in downtrends. Rebar is back to Sep levels from last year.
- Copper is showing better early 2025 trends compared to iron ore, which has seen some modest divergence open up between the two series, but it isn't large by historical standards.
PHILIPPINES: Dec Inflation Firms, But Close To Mid Point Of BSP Target Band
Philippines Dec inflation was stronger than forecast. We rose 0.6%m/m, versus a consensus of 0.3% (Nov was 0.4%). In y/y terms we were up 2.9%, against a 2.6% forecast and 2.5% prior. Core CPI rose 2.8%y/y, versus 2.5% prior.
- The detail showed solid rises in for food and transport prices in m/m terms. In y/y terms, transport prices were back in positive territory after being negative. Other categories saw similar y/y outcomes to Nov.
- This still leaves Philippines CPI within the central bank's 2-4% target band. Earlier remarks from the central bank and the government stated they would be vigilant to upside inflation risks in 2025. Commodity prices and adverse weather conditions are watch points, while the BSP will continue its data dependent approach.
- The next BSP meeting will be held on Feb 20. We get another inflation update before then. Note the central bank will meet 6 times this year, instead of seven.
ASIA FX: USD/KRW Sub Monday Lows, TWD Up, CNH Lags
North East Asia currencies have rallied so far in Tuesday trade, with the won and Taiwan dollar outperforming CNH comfortably. Spill over from tech equity gains is likely helping KRW and TWD, while USD/KRW also continues to correct from overbought conditions.
- Spot USD/KRW was last near 1351, up around 0.65% in won terms for the session. This puts the pair comfortably sub intra-session lows from Monday's session (just under 1356) and leaves us very close to the 20-day EMA (just under 1450). Back to early Oct, dips sub this support level have been supported in the pair. The RSI (14) continues to correct low, last around 58.
- Local equities are up around 0.50% (for the Kospi), off earlier highs, as Nvidia's CEO speech in the US failed to ignite fresh tech optimism. Nasdaq futures sit slightly in the red at the time of writing. Offshore investors have bought local South Korean stocks today, but only a modest +$32mn.
- Spot USD/TWD is back to the 32.70/75 region, up around 0.40% so far in TWD terms today. The Taiex, is holding up over 1% so far today.
- USD/CNH is back under 7.3400, but above intra-lows from Monday (7.3132). We are up 0.10% in CNH terms. Spot USD/CNY is little changed, holding under 7.3300 at this stage. The USD/CNY fixing was left close to unchanged. China equities are down modestly at the break, following the US blacklisting key tech firms including Tencent overnight.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 07/01/2025 | 0730/0830 | *** |  CH | CPI |
| 07/01/2025 | 0745/0845 | *** |  FR | HICP (p) |
| 07/01/2025 | 0830/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 07/01/2025 | 0900/1000 | ** | EU | ECB Consumer Expectations Survey |
| 07/01/2025 | 0900/1000 | *** |  DE | Bavaria CPI |
| 07/01/2025 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 07/01/2025 | 1000/1100 | *** | EU | HICP (p) |
| 07/01/2025 | 1000/1100 | ** | EU | Unemployment |
| 07/01/2025 | 1000/1100 | *** |  IT | HICP (p) |
| 07/01/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1330/0830 | ** |  US | Trade Balance |
| 07/01/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 07/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 07/01/2025 | 1500/1000 | * | CA | Ivey PMI |
| 07/01/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 07/01/2025 | 1500/1000 | *** | US | JOLTS jobs opening level |
| 07/01/2025 | 1500/1000 | *** | US | JOLTS quits Rate |
| 07/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 07/01/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 08/01/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 08/01/2025 | 0700/0800 |  SE | Flash CPI | |
| 08/01/2025 | 0700/0800 | ** | DE | Retail Sales |
| 08/01/2025 | 0700/0800 | ** | DE | Manufacturing Orders |
| 08/01/2025 | 0745/0845 | ** | FR | Consumer Sentiment |
| 08/01/2025 | 0745/0845 | * | FR | Foreign Trade |
| 08/01/2025 | 1000/1100 | ** | EU | EZ Economic Sentiment Indicator |
| 08/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 08/01/2025 | 1000/1100 | ** | EU | PPI |
| 08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 08/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 08/01/2025 | 1005/1005 | GB | BOE's Woods Financial Services Regulation hearing | |
| 08/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 08/01/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 08/01/2025 | 1330/0830 | *** | US | Jobless Claims |
| 08/01/2025 | 1330/0830 | US | Fed Gov Waller |