- The USD's recovery on Friday hasn't extended to the start of this week. The USD index making fresh multi month, as EUR/USD rebounded through 1.0500, while German equity futures rose 1%. The German election saw the conservative CDU/CSU win the most votes, which was in line with expectations.
- Japan markets have been closed today, meaning no cash Tsy trading. Yen has lagged broader USD softness, with broader risk appetite stabilizing. US equity futures are +0.50% higher.
- NZ retail sales volumes showed a solid bounce in Q4, led by discretionary spending, as RBNZ easing aided spending sentiment.
- Looking ahead, we have the German IFO, final EU inflation, as well as BoE speak. We hear from the BoC as well. In the US we have the Dallas Fed survey.
MARKETS
- Tsys futures are trading slightly lower today, however remain trading within Friday's ranges. Cash tsys trading has been closed with Japan out and with a lack of major data or headlines out during the session there isn't much to mention. Futures volumes has been largely tied with rolls. TU is -01⅜ at 102-27, while TY is -04 at 109-18
- TY recovered well off the intraday low of 108-21+ posted Wednesday, keeping the price clear of any test on 108-04 support. As such, markets are narrowing the gap with last week’s highs and may post a strong weekly candle at the close. Any further gains here would expose key resistance and the bull trigger at 110-00, the Feb 7 high. For bears, recent weakness resulted in a break of 108-20+, the Feb 4 low, signalling the end of the correction between Jan 13 - Feb 7. Moving average studies highlight a dominant downtrend. A resumption of weakness would open 108-00, Jan 16 low, and expose 107-06, Jan 13 low and bear trigger.
- Last week saw the short-end outperform, with the 1-3yr tenors ending -6bps richer, while the 10yr closed 4.5bps richer at 4.431%, we have only traded below here once this year, back on Feb 5th when we reached a yield of 4.418%. The 2s10s closed the week little changed at 23.5bps, although this is10bps flatter ytd.
- Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
- There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity
GERMANY: Official Interim Election Results Tilt Towards Missing BSW & FDP
Official interim results on the German parliamentary election closely tilt towards the possibility of a two-party coalition of Union (CDU/CSU) and SPD, as they see both FDP and BSW to not secure enough votes for parliamentary representation.
- Results are as follows: CDU/CSU 28.6%, AfD 20.8%, SPD 16.4%, Greens 11.6%, Left 8.8%, BSW 4.972%, FDP 4.3%.
- Even though the BSW's gap to 5% is very narrow, chances of the final results tilting in favour of them appear rather low at this stage.
- This would make possible a two-party "grand coalition" of union (CDU/CSU) and SPD, which would be associated with bringing higher stabiltiy in government compared to a three-party outcome.
- For a 2/3rds qualified majority for potential debt brake reform, 420 out of the likely 630 Bundestag seats would be required - and the ~414 seats of the 'core' parties represented (CDU/CSU, SPD, and Greens) would fall short of that. Thus, approval from the Left will be needed, who are in favour of debt brake reform in theory but might push for concessions from the government, complicating negotiations.
- Detailed results here: https://www.bundeswahlleiterin.de/bundestagswahlen/2025/ergebnisse/bund-99.html
AUSSIE BONDS: Holding Richer, Narrow Ranges On A Data-Light Day
ACGBs (YM +6.0 & XM +7.5) are holding stronger on a data-light session with narrow ranges.
- There is no cash US tsy trading in the Asia-Pac session today with Japan closed for the Emperor’s Birthday holiday. TYH5 is dealing -0-04 compared to closing levels at 109-18.
- (AFR) “Time for a Bex and good lie down after RBA rate call” by Stephen Miller (see BBG link)
- Cash ACGBs are 7bps richer.
- Swap rates are 7bps lower.
- The bills strip has bull-flattened, with pricing +1 to +7.
- RBA-dated OIS pricing is flat to 6bps softer across 2025 meetings today but remains 1-3bps firmer than last Tuesday’s pre-RBA levels. A cumulative 48bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the local calendar is empty, ahead of January's CPI Monthly on Wednesday.
- The AOFM plans to sell A$800mn of the 3.75% 21 April 2037 bond on Wednesday and A$700mn of the 1.75% 21 November 2032 bond on Friday.
BONDS: NZGBS: Closed Mid-Range With A Bull Flattener
NZGBs closed showing a bull-flattener, with benchmark yields 2-5bps lower. Nevertheless, NZGBs finished mid-range, with the 10-year underperforming its Australian counterpart.
- The AU-NZ 10-year differential finished at -9bps compared to the recent high of +10bps in early November, which marked the highest level since August 2022. However, a simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past 18 months shows that the 10-year differential is around 14bps above fair value based on the regression model.
- NZ Q4 2024 retail sales (ex inflation) were stronger than forecast, rising 0.9% q/q, against a 0.5% market expectation. This was the firmest q/q print since the end of 2021. This shows the impact of RBNZ easing beginning to benefit parts of consumer spending.
- Swap rates closed 3-6bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed little changed out to August but 3-5bps firmer beyond. 27 bps of easing is priced for April, with a cumulative 58 bps by November 2025.
- Tomorrow, the local calendar is empty.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$225mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.
NEW ZEALAND: Retail Volumes Stronger Than Forecast, Discretionary Spending Firms
New Zealand Q4 2024 retail sales (ex inflation) were stronger than forecast, rising 0.9%q/q, against a 0.5% market expectation. The Q3 dip of 0.1%q/q, was also revised higher to flat.
- This was the firmest q/q print since the end of 2021. Stats NZ noted: "Ten of the 15 retail industries had higher retail sales volumes in the December 2024 quarter, compared with the September 2024 quarter, after adjusting for price and seasonal effects."
- "The biggest contributors to the rise in retail activity in the December 2024 quarter were: electrical and electronic goods retailing – up 5.1 percent, department stores – up 4.2 percent, accommodation – up 7.6 percent, food and beverage services – up 2.3 percent."
- This hints at some return of discretionary spending, with most of these categories negative in parts of 2024. This shows the impact of RBNZ easing beginning to benefit parts of consumer spending.
- The chart below shows the level of retail sales volumes. We are still comfortably sub 2021 cycle highs. In y/y terms, Dec retail sales volumes were close to flat.
Fig 1: NZ Retail Sales Volumes - Level
Source: MNI - Market News/Bloomberg
AUSSIE BONDS: AU-NZ 10Y Yield Differential Too High
The AU-NZ 10-year yield differential is 5bps lower today, standing at -12bps compared to the recent high of +10bps in early November, which marked the highest level since August 2022.
- The recent decline in the 10-year yield differential between Australia and New Zealand has mirrored a similar move in the AU-NZ 1-year forward 3-month swap rate (1Y3M) spread.
- However, a simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past 18 months shows that the 10-year differential is around 12bps above fair value based on the regression model (-11bps compared to a fair value of -23bps).
- The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
Figure 1: AU-NZ: 10-Year Yield Differential Vs. FV
Source: MNI – Market News / Bloomberg
FOREX: EUR Rebound Falls Short Of Jan High, But Broad USD Weakness Evident
The USD BBDXY index sits at in the low 1282 region dealings, just up from session lows of 1281.2. These levels were last seen back in mid Dec last year. EUR/USD has been the best performer in the G10 space, rising back through 1.0500, as market digested the Sunday German election results.
- The German election saw the conservative CDU/CSU win the most votes, which was in line with expectations. Focus now shifts to what type of coalition government will be formed. German equity futures opened down a touch before rallying over 1%, aiding EUR gains.
- For EUR/USD, the pair tracked equity futures higher, and moved through option expiries at the 1.0500 level. We reached highs of 1.0528, which was very close to the Jan highs of 1.0533, but we sit back lower now (last 1.0510/15, still +0.50% for the session).
- Other EU bloc currencies are also higher, up 0.35% for NOK, and 0.40% for SEK,
- Yen has lagged broader EU bloc currencies gains. We were last 149.20/25, little changed for the session. We did to fresh lows of 148.85, but we this move was short lived. Japan markets are out today, while the equity mood is better from a US futures standpoint, up around 0.50%. A number of regional equity markets are down, but not as much as implied by Friday session losses in the US.
- Some medical experts looked to play down fears of a fresh pandemic, after it was reported a new covid like virus that can reportedly transmit from bats to humans weighed on broader risk appetite on Friday (including US equities).
- AUD/USD and NZD/USD are both up by around 0.30-0.35%. AUD/USD at 0.6380 is still short of recent highs above 0.6400. NZD/USD is at 0.5760 is just under recent highs at 0.5773. Earlier data showed stronger than expected NZ retail sales volumes for Q4 last year, led by better discretionary spending.
- Looking ahead, we have the German IFO, final EU inflation, as well as BoE speak. We hear from the BoC as well. In the US we have the Dallas Fed survey.
FOREX: CFTC Positioning Update; Further Moves Against USD, Led By EUR
In terms of the CFTC positioning update from Friday, leveraged contracts saw a sharp shift against the USD. This data is for the week ending Feb 18. The table below outlines positioning shifts by currency and investor type and what the outstanding position is now for each currency.
- Except for NZD, leveraged players sold the USD against all the currencies covered by CFTC. Notably shifts were for AUD, EUR and JPY. Still, in an outright sense we have net shorts across all currencies except for GBP for this investor class.
- This suggests more short covering/exiting long USD positions could take place, although such flows may have already transpired to some degree, as current USD index levels sub those seen on Feb 18.
- For asset managers, the bias was also skewed against the USD, although this was mainly reflected in terms of positive flows into EUR and GBP.
- EUR/USD was the stand out last week from a flow standpoint.
Fig 1: CFTC Positioning Update By Currency & Investor Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | 7169 | -23850 | 1610 | 38924 |
| EUR | 9600 | -11227 | 12288 | 172533 |
| GBP | 3182 | 34804 | 11589 | -56476 |
| AUD | 9148 | -33347 | -2017 | -31084 |
| NZD | -2484 | -13860 | -484 | -43799 |
| CAD | 3553 | -78094 | 3422 | -135461 |
| CHF | 798 | -14160 | -1633 | -39052 |
| MXN | 4023 | -8286 | -2082 | 10885 |
Source: CFTC/MNI - Market News/Bloomberg
ASIA STOCKS: China & Hong Kong Equities Mostly Lower, Property Finds Support
It has been a rather quiet session for Asian equities this morning, with both Hong Kong & China equities outperforming the sell-off we saw in US equities on Friday night, those moves came after there were reports of a new bat coronavirus study. While tension remain somewhat elevated as Trump moved to restrict Chinese investment in some strategic US industries, while also considering further restrictions on outbound investment to Beijing in sectors including semiconductors and AI.
- The Hang Seng Index is 0.50% lower, with the Hang Seng Tech Index dropping 1.5%, following Friday’s sharp rally. US-China trade tensions weighed on sentiment, with Wuxi Biologics (-8.9%) and Wuxi AppTec (-8.7%) hit after the U.S. moved to restrict Chinese investment in healthcare. Lenovo (-5.2%) and Kuaishou (-6%) also declined. However, travel stocks outperformed, with Trip.com (+4.4%) and Tongcheng Travel (+3.1%) rising.
- Mainland equities are also lower, with the CSI 300 and Shanghai Composite both down 0.1%. Property stocks gained on expectations of policy support at the upcoming National People’s Congress, with Sunac China (+12%) and China Vanke (+8.2%) leading gains, the BBG China Property Developer Gauge is 2.50% higher. Robotics stocks advanced on reports that Shenzhen will establish a ¥10b industry fund to support AI and robotics, lifting Shengtong Printing (+10%) and Shenzhen Invt Electric (+8.4%). Meanwhile, Chinese shipping stocks declined after the U.S. proposed fees on Chinese-built vessels.
- There isn't anything major on the data front this week for China, while Hong Kong has trade balance data out tomorrow, followed by GDP numbers on Wednesday
ASIA STOCKS: Asian Equities Mixed Following US Sell-Off On Friday
Asian stocks have traded mixed at the start of the week, with investors staying cautious following a Wall Street selloff triggered by weak economic data. The Hang Seng and mainland Chinese benchmarks remained range-bound, while a broad gauge of Asian equities edged lower after hitting a four-month high on Friday. The dollar weakened, with the euro gaining 0.5% after Germany’s conservative party secured an election victory.
- Chinese tech stocks, which have rallied this year on AI optimism and policy support, remained a key focus. Allianz Global Investors noted that China remains under-owned by foreign investors despite its innovation potential. Meanwhile, trade tensions persisted, with China’s Vice Premier He Lifeng raising concerns over new U.S. tariffs, and President Trump directing further restrictions on Chinese investment in strategic sectors. The HSI is -0.70%, while CSI 300 is -0.20%
- Japan is out today for a publica holiday, however Warren Buffett’s Berkshire Hathaway signaled plans to increase its stake in Japan’s five largest trading houses.
- South Korea's KOSPI dropped 0.60% as auto and chip stocks led declines. Samsung Electronics fell 1.37%, SK hynix lost 3.34%, and Hyundai Motor slipped 0.50%. However, POSCO Holdings rose 0.18%, and HMM surged 13.82%.
- Taiwan's TAIEX is 0.6% lower as global semiconductor stocks struggle, TSMC is down 1.40%, following the SOX dropping 3.28% on Friday.
- Australia's ASX 200 is flat with as mining and tech stocks struggle. Wisetech Global plummeted as much as 23% after director resignations over disagreements with its founder. New Zealand's The NZX 50 dropped 1.7%, with Summerset Group dropping 6.5%.
Looking ahead, Nvidia’s earnings on Wednesday will be a key risk event, as traders anticipate higher market volatility, given the company’s central role in the AI-driven rally. Other notable events include central bank decisions in South Korea and Thailand, along with U.S. consumer confidence data.
ASIA STOCKS: Asian Equity Flows Mixed, India Continues To See Outflows
Flows were mixed last week, with Taiwan seeing about $1b of inflows, with $615m coming on Friday. India erased roughly half of Wednesday large inflow, to post another week out outflows.
- South Korea: Recorded -$63m in outflows Friday, bringing the 5-day total to -$329m. YTD flows remain negative at -$1.694b. The 5-day average is -$66m, better than the 20-day average of -$82m but worse than the 100-day average of -$106m.
- Taiwan: Posted $615m in inflows Friday, bringing the 5-day total to $1.003b. YTD flows remain negative at -$2.037b. The 5-day average is $201m, better than the 20-day average of $74m and the 100-day average of -$49m.
- India: Recorded -$405m in outflows Thursday, bringing the 5-day total to -$535m. YTD outflows remain heavy at -$11.142b. The 5-day average is -$107m, better than the 20-day average of -$234m and the 100-day average of -$226m.
- Indonesia: Posted -$43m in outflows Friday, bringing the 5-day total to -$71m. YTD flows remain negative at -$718m. The 5-day average is -$14m, better than the 20-day average of -$26m and the 100-day average of -$33m.
- Thailand: Saw -$21m in outflows Friday, reducing the 5-day total to $64m in net inflows. YTD flows remain negative at -$225m. The 5-day average is $13m, better than the 20-day average of $3m and the 100-day average of -$19m.
- Malaysia: Registered -$19m in outflows Friday, bringing the 5-day total to -$127m. YTD flows are negative at -$912m. The 5-day average is -$25m, worse than the 20-day average of -$22m and in line with the 100-day average of -$27m.
- Philippines: Recorded -$7m in outflows Friday, bringing the 5-day total to -$47m. YTD flows remain negative at -$176m. The 5-day average is -$9m, worse than the 20-day average of -$4m and the 100-day average of -$5m.
Table 1: EM Asia Equity Flows
Oil Continues to Fluctuate As Trump Aims at China.
- China’s ailing economic growth has at different times, driven oil prices lower on concerns of their demand dropping.
- As President Trump takes new aim at China with curbs on spending on tech, energy and fees on the use of China’s commercial ships, oil prices have dipped fearing this could challenge China’s growth further.
- Oil had rallied early on with WTI reaching $70.49, before declining below Friday’s close to reach $70.18.
- Brent had seen early gains reaching $74.62 before it declined also to $74.30 marginally above the US close on Friday
- The move lower in oil likely increases the probability of OPEC+ sticking to the postponement of an increase in supply, a subject that draws the attention of President Trump and his demands to lower prices
- News of supply from Iraq could see a resumption of exports from Kurdistan via a pipeline to Turkey. Kurdistan is a semi-autonomous region that historically had supplied oil via Turkish pipeline. Due to a dispute with the Central Government, shipments had stopped.
- This will pose an interesting dynamic to the supply constraints from OPEC+ that oversee Iraq’s output, given Kurdistan’s desire to start shipments again.
- The US’s Interior Secretary Burgum has suggested that an opportunity exists for the US to map all deposits of oil and gas on US Federal land to further cement the US’s production capabilities.
- News of the US President using sanction relief as a bargaining chip with Russia, appear to have the desired effect with the Kremlin as it sees China and India as a more reliable partner (according to BBG)
Gold’s Fortunes Fluctuate in Asia Trading Day.
- Gold sold off in early trading in Asia today, before staging a comeback.
- Opening at US$2,935.45, gold sold off to a low of $2,921.48 before rebounding back above opening levels to be at $2,941.95.
- Year to date Gold is up over 10% in 2025, delivering positive returns in every trading week of the year.
- The much-mooted revaluation of US Gold reserves touted by the US President’s team could actually be good for prices, according to BofA Head of Commodities Research (per BBG).
- In a further bullish sign for gold yet another Central Bank has increased their gold purchases with data from Iran showing imports of 100 tonnes during their financial year, up from 30 tonnes prior (according IRNA).
MNI BOK Preview FEB 2025: On Hold Again.
- There has been some positive signs in the time since the last BOK meeting with an improvement in CPI, Industrial Production and Unemployment,
- The data over the last month has seen distortions from Lunar New Year Holidays.
- The volatility in the won has moderated, with currency posting gains over the last month.
- The BOK governor has stepped back from rate cuts, pushing the onus onto the government for a fiscal response.
- Despite growing consensus we see reason for a pause in February.
SINGAPORE: January Inflation Shows Further Sharp Easing In Core Pressures
Singapore inflation fell -0.7%m/m in Jan, versus a 0.3% gain in Dec. This saw the y/y headline pace ease to 1. % from 1.5%. The core rate slumped to 0.8% from 1.7% in y/y terms. For headline this is the softest y/y pace since early 2021, for core it is back to mid 2021 levels. The CPI was rebased, with 2024 now the base year.
- In m/m terms the MAS core measure was down 0.2%. Housing and utilities fell 2.8%m/m, while recreation and culture was down 3.9%. Clothing, up 1.5% and transport, up by the same amount, with the positives.
- The data underscores the MAS's decision at the end of January to ease policy settings, amidst slowing inflation pressures.
- With the SGD NEER y/y pace back to 0.55% by end Jan, this is already reflected in FX pricing to a degree.
INDIA: Central Bank to Inject US$10bn via FX Swaps.
- In signs of new direction from the new Governor, the RBI announced on Friday plans to inject up to $10bn through FX swaps.
- On February 28, the RBI will hold a 3-year swap auction.
- The intention of the auction is to inject liquidity into the system.
- In January, the RBI injected $5bn in a bid to improve liquidity.
- The RBI’s defence of the currency in the latter part of 2024 has created a liquidity squeeze, particularly prevalent in the interbank market.
- Having reached highs of 6.78% in December, the 14-day T-bill has seen lower yields in recent weeks following the injections from the Central Bank.
ASIA FX: USD/Asia Pairs Lower, But Up From Best Levels
- Asia currencies are firmer, but some currencies in the region are away from best levels seen versus the USD. IDR remains a laggard at this stage though. USD/CNH testing sub 7.2300 earlier, but now sits back above this level. Positive spill over from EUR gains benefits was evident earlier, although EUR is also away from best levels versus the USD. EUR/USD is still above 1.0500 and EU stock futures are up, as Sunday's election in Germany largely unfolded as expected. The USD BBDXY is at 1282.25, slightly up from session lows.
- Current levels, 7.2365, put USD/CNH close to its 200-day EMA (near 7.2340). Earlier lows in the pair were at 7.2259. A clean break lower doesn't much until Nov 13 lows form last year at 7.2131, then we have the 7.2000 figure level. China and Hong Kong equities have lost a little ground so far today, presenting FX with a mild headwind.
- Spot USD/KRW is back to 1426/27, up around 0.50% so far today in won terms. This is sub late Jan lows for the pair, with the 100-day EMA at 1420/21 not too far away. Earlier we got to 1424.1.
- USD/SGD is back to 1.3345/50, up from earlier lows of 1.3312. Data showed a slump in core inflation pressures for Jan, underscoring the recent MAS easing. this, couple with some slightly higher USD levels elsewhere has helped curb SGD gains.
- Baht is up 0.50% to 33.40/45, which has also been a strong performer today. These are levels last seen in Oct 2024.
- USD/PHP is back to 57.75/80, with the pair eyeing fresh YTF lows. USD/MYR is back to 4.4000. Jan lows for this pair rest at 4.3650.
- IDR has been a laggard, although has seen some modest catch up this afternoon. USD/IDR was last near 16290, after struggling to break sub 16300 earlier. USD/IDR is still trailing the US real yield shift lower.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 24/02/2025 | 0900/1000 | *** |  DE | IFO Business Climate Index |
| 24/02/2025 | 0900/0900 |  GB | BOE's Lombardelli remarks at BOE BEAR Conference | |
| 24/02/2025 | 1000/1100 | *** |  EU | HICP (f) |
| 24/02/2025 | 1315/0815 |  CA | BOC Deputy Gravelle speaks on BOE panel at "The Future of the Central Bank Balance Sheet" conference | |
| 24/02/2025 | 1315/1315 | GB | BOE's Ramsden and Saporta panellist on CB Balance sheet during QT | |
| 24/02/2025 | 1330/0830 | * | CA | Quarterly financial statistics for enterprises |
| 24/02/2025 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 24/02/2025 | 1530/1030 | ** |  US | Dallas Fed manufacturing survey |
| 24/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 24/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 24/02/2025 | 1800/1800 | GB | BOE's Dhingra speech on state of the UK monetary policies | |
| 24/02/2025 | 1800/1300 | * | US | US Treasury Auction Result for 2 Year Note |
| 25/02/2025 | 0700/0800 | *** | DE | GDP (f) |
| 25/02/2025 | 0920/0420 | US | Dallas Fed's Lorie Logan | |
| 25/02/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 25/02/2025 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 25/02/2025 | 1300/1400 | EU | ECB's Schnabel at BOE's Annual Conference on Balance Sheet | |
| 25/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index |
| 25/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
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