- The USD has lost ground today, with JPY outperforming post the Q4 GDP beat. JGB futures are weaker, -24 compared to the settlement levels, and at session lows. Tsys futures are trading slightly lower today, largely just seen as profit taking after a rally on Friday, while there is no cash trading today with the US out for President's Day.
- Chinese and Hong Kong stocks are trading mixed today, there was early strength in tech stocks, however we have since seen the move higher been completely erased, the move came after headlines came out earlier stating President Xi will meet with Jack Ma, with traders now awaiting details. USD/CNH dipped but was supported near 7.2400.
- Later the Fed’s Harker, Bowman and Waller speak, while there isn’t any US data due to the Presidents Day holiday. Euro area December trade data print and the Eurogroup meeting takes place.
MARKETS
US TSYS: Tsys Futures Slightly Lower, Volumes Below Average, Cash Trading Closed
- Tsys futures are trading slightly lower today, largely just seen as profit taking after a rally on Friday, while there is no cash trading today with the US out for President's Day. Volumes are not surprisingly well below recent averages, while we remain trading within Friday's ranges. TU is -00⅝ at 102-23¾, TY is -03+ at 109-06+
- 10yr Treasury futures have recovered from Wednesday's low, rising back above the 50-day EMA in the process. Recent weakness resulted in a break of 108-20+, the Feb 4 low. The breach highlights a stronger reversal and most likely the end of the corrective cycle between Jan 13 - Feb 7. A continuation lower would open 108-00, the Jan 16 low, and expose 107-06, the Jan 13 low and bear trigger. Key resistance and the bull trigger is 110-00, Feb 7 high.
- Following the few busy sessions for key economic data last week, fed funds futures are still only pricing in a single 25bps cut this year, currently expected at the September meeting, although pricing has firmed throughout the past week with about a 60% chance the cut will come in June.
JGBS: Futures At Cheaps, Curve Twist-Flattening, 20Y Supply Tomorrow
JGB futures are weaker, -24 compared to the settlement levels, and at session lows.
- Japan's preliminary Q4 GDP was above market expectations. Q3 also saw positive revisions. The q/q annualized outcome was +2.8% versus 1.1% forecast. In q/q terms, this was 0.7% (0.3% was forecast, while Q3 was revised up to 0.4% from 0.3% originally reported).
- December industrial production was revised down to -0.2% in the final report, while the operating ratio fell to 102.4 in December compared to 102.6 in the previous month. December’s Tertiary Industry Index rose 0.1% m/m.
- “Morgan Stanley MUFG Securities revises its forecasts higher on Japanese bond yields to reflect recent market moves, strategists including Koichi Sugisaki write in a note.” (see BBG link)
- Cash US tsys are closed for the Presidents Day holiday. TYH4 is slightly weaker.
- Cash JGBs are 2bps cheaper to 1bp richer, with a flattening bias. The benchmark 10-year yield is 1.2bps higher at 1.374% versus the cycle high of 1.377%.
- Swap rates are 1-2bps higher. Swap spreads are wider.
- Tomorrow, the local calendar will see Tokyo Condominiums for Sale data alongside 20-year supply.
STIR: BoJ-Dated OIS Pricing Extends February Firming
BoJ-dated OIS pricing continues to firm in February, with rates rising 1–6bps compared to late January levels, led by the October contract.
- Recent economic data from Japan, including today’s Q4 GDP (P) beat, and stronger-than-expected wage growth and household spending, has fueled speculation that the BoJ may accelerate and extend its rate hikes beyond prior market expectations.
- Markets currently assign a 2% probability to a 25bp hike in March, a cumulative 58% chance by June, and now fully price in a 25bp increase by September—a shift from late January when a hike wasn’t fully priced in until October.
Figure 1: BoJ-Dated OIS – Today Vs. Friday 31 January
Source: MNI – Market News / Bloomberg
JAPAN DATA: Q4 GDP Growth Above Expectations, Consumer Spending Still Slows
Japan's preliminary Q4 GDP was above market expectations. Q3 also saw positive revisions. The q/q annualized outcome was +2.8% versus 1.1% forecast. In q/q terms this was 0.7% (0.3% was forecast, while Q3 was revised up to 0.4% from 0.3% originally reported). In nominal terms, GDP was up 1.3%, also above the 1.2% forecast, with Q3 revised a touch higher. The GDP deflator was 2.8%y/y, in line with market forecasts.
- The detail showed positive surprises for consumption +0.1%, versus -0.3% forecast (Q3 was a 0.7% rise) and net exports +0.7%ppts contribution to growth (+0.4ppt was forecast). Business spending rose 0.5%, which was below forecasts but still above the negative Q3 outcome.
- Domestic and private demand were still down in q/q terms after firm rises through Q2/Q3 of 2024. Both metrics are still up in y/y terms.
- The GDP deflator was up 0.6% q/q, accelerating from the 0.3% gain in Q3.
- The data suggest a fairly resilient economic growth backdrop. It continues to suggest a bias towards further policy adjustments from the BoJ. The slowdown in consumer spending, whilst not as weak as feared, will be a watch point though.
Fig 1: Japan Recorded Positive Growth For 3 Straight Quarters
Source: MNI - Market News/Bloomberg
RBA: MNI RBA Preview-February 2025: Cautious February Rate Cut
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- The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%. However, the decision is unlikely to be clear cut and as a result, the statement and press conference are likely to sound cautious.
- The decision may be framed as a reduction in policy restrictiveness due to lower-than-expected inflation rather than a desire to be stimulatory.
- A 25bp rate cut in April remains more than fully priced (117%), while the probability of a cut tomorrow stands at 83%.
- Q4 headline and trimmed mean inflation are likely to result in the updated staff forecasts being revised lower in at least 2025 and the mid-point of the band brought forward from Q4 2026.
- There is enough uncertainty regarding the outlook and strength in recent data to suggest that the tone around a February rate cut is likely to be cautious and that another move in April is unlikely, especially as it will be the first meeting with the new dual board structure.
AUSSIE BONDS: Cheaper Ahead Of RBA Policy Decision Tomorrow, 25bp Cut 83% Priced
ACGBs (YM -3.0 & XM -3.0) are weaker with US tsy futures (TYH5 at 109-06+, -0-03+ compared to closing levels) ahead of tomorrow’s RBA Policy Decision. Cash US tsys are closed today for the Presidents Day holiday.
- Tomorrow’s RBA decision takes centre stage, with economists widely anticipating a 25bp rate cut.
- The RBA statement and updated forecasts will be released at 1430 AEDT, with Governor Bullock’s press conference at 1530 AEDT.
- There are also Q4 wages on Wednesday and January jobs data on Thursday.
- The Q4 WPI is forecast to post another 0.8% q/q rise bringing the annual rate down to 3.2% from 3.5% in Q3. January employment is projected at +20k, with the unemployment rate rising 0.1pp to 4.1%.
- Cash ACGBs are 3bps cheaper.
- Swap rates are 3-4bps higher.
- The bills strip is flat to -4, with a steepening bias.
- RBA-dated OIS pricing is flat to 4bps firmer across 2025 meetings today, with Dec-25 leading.
- A 25bp rate cut in April remains fully priced (117%), while the probability of a cut tomorrow stands at 83%.
- AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday.
BONDS: NZGBS: Closed Cheaper & At Worst Levels, RBNZ Decision On Wednesday
NZGBs closed 2-3bps cheaper but at the session’s worst levels.
- Outside of the previously outlined NZ PSI and Migration data, there hasn't been much by way of domestic drivers to flag.
- The NZ-AU 10-year yield differential closed unchanged at +9bps. It has traded in a -10bps to +20bps since October.
- Cash US tsys are closed for the Presidents Day holiday. TYH4 is slightly weaker.
- Swap rates closed 3-4bps higher.
- RBNZ dated OIS pricing is flat to 5bps firmer across meetings today, ahead of the RBNZ Policy Decision on Wednesday.
- The RBNZ decision is widely expected to cut rates 50bp again to 3.75%. Revised staff forecasts will also be published.
- All 22 analysts surveyed by Bloomberg are forecasting a 50bp rate cut and the RBNZ shadow board is recommending 50bp of easing.
- Notably, OIS pricing is 2–19bps firmer than pre-Q4 Labour Market data levels from February 4.
- Nevertheless, 49bps of easing is priced for Wednesday, with a cumulative 111bps by November 2025.
- Tomorrow, the local calendar is empty.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% Apr-27 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
FOREX: USD Weakness Continues, Yen Up With Q4 GDP Beat, NZD & A$ Firm
The USD is weaker in the first part of Monday trade. The BBDXY index was last near 1287, close to session lows, but above intra-session lows form Friday, near 1286. Yen has outperformed so far today, aided by the Q4 GDP beat.
- USD/JPY got to lows of 151.51, but sits slightly higher in latest dealings, last near 151.65, still up close to 0.45% in yen terms versus end Friday levels from NY.
- The Q4 GDP print showed better than expected GDP growth and positive growth in nominal terms as well. Consumption was slower than the Q3 pace but at 0.1% remained positive (and above market expectations). Business investment also rose, but at +0.5%q/q was sub market forecasts.
- The data should keep the bias for the BOJ skewed towards further tightenings. For USD/JPY, earlier Feb lows at 150.93 are likely to be a downside focus point.
- NZD and AUD have also ticked higher, ahead of key central bank meetings this week. The NZ services PMI moved back into expansion territory, after a long period of contraction. NZD/USD got to highs of 0.5750, but sits back at 0.5740 in latest dealings. Key levels to watch include, resistance is 0.5763 (Dec 18 highs), while 0.5790 (100-Day EMA) could become a target.
- AUD/USD is up close to 0.6370, up by a similar amount to NZD. 0.6383 is the Dec 13 in terms of upside target. The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%. However, the decision is unlikely to be clear cut and as a result, the statement and press conference are likely to sound cautious.
- Hong Kong and China equities were higher at the lunch time break, but away from best levels. China President Xi Jinping is meeting with various private sector business leaders. This is fueling optimism of greater traction between the government and the private sector. Tech related optimism is also running in the background.
- Looking ahead, the Fed’s Harker, Bowman and Waller speak, while there isn’t any US data due to the Presidents Day holiday. Euro area December trade data print and the Eurogroup meeting takes place.
FOREX: Asset Manager Yen Longs The Highest Since 2021
Per the CFTC FX positioning update from Friday, leveraged contract shifts were mixed in the week ending the 11 of Feb. It was a similar backdrop for asset manager contract shifts, although there was some solid demand for JPY, AUD and CAD in that week, see the table below.
- The bias for leveraged contracts was to move against the USD, albeit fairly modestly. GBP, NZD and CAD all source net buying in this space. Still outside of GBP, the net outright position was short for all the currencies measured in the survey.
- In the asset manager space, we saw a decent addition to net longs for JPY. This investor base is now at the highest level of fresh longs since March 2021.
- We also saw decent covering of shorts in AUD and CAD by asset managers, although this investors base is still outright short both currencies.
- On balance, last week's positioning update still gives scope for USD longs to be trimmed further, given weaker data outcomes in the US and a modest tariff start from the Trump administration relation to pre-inauguration fears.
Table 1: CFTC Positioning - By Currency & Investor Type - Week Ending Feb 11 2025
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | -1931 | -31019 | 23619 | 37314 |
| EUR | 1350 | -20827 | -3505 | 160245 |
| GBP | 8723 | 31622 | -2989 | -68065 |
| AUD | -3946 | -42495 | 16490 | -29067 |
| NZD | 5050 | -11376 | -6957 | -43315 |
| CAD | 9171 | -81647 | 11229 | -138883 |
| CHF | -1325 | -14958 | 3344 | -37419 |
| MXN | 1006 | -12309 | 959 | 12967 |
ASIA STOCKS: Asian Equities Higher, As Tech Stocks Lead The Way
Asian equities advanced, with the MSCI Asia Pacific Index rising 0.8%, marking a fourth consecutive session of gains. Tech stocks led the rally, driven by Tencent, which surged to its highest level since 2021 after integrating DeepSeek’s AI model into WeChat search. Optimism around AI adoption and potential private-sector support from Chinese President Xi’s expected meeting with entrepreneurs further boosted sentiment.
- In Japan, the Topix gained 0.4% as strong earnings from Sony and Sanrio lifted sentiment, though automakers struggled after Donald Trump warned of potential US auto tariffs. Taiwan’s Taiex jumped 1.3%, with TSMC contributing to gains, while South Korea’s Kospi climbed 0.7%.
- China’s CSI 300 up 0.10% and Hong Kong’s HSI up 0.20% posted modest gains, while Chinese brokerage stocks rose on news of a government stake transfer to Central Huijin Investment.
- Meanwhile, Australian equities underperformed, with the ASX 200 falling 0.4%, pressured by insurance stocks on reports of potential political intervention. There has been a flurry of earnings out in Australia today with notable movers included a2 Milk (+18%) on strong earnings, Bluescope Steel (+9.3%) on better-than-expected results, and Bendigo & Adelaide Bank (-19%) after a revenue miss.
- Investors are also watching upcoming earnings from Alibaba, Baidu, and Rio Tinto, along with rate decisions from Australia and Indonesia.
ASIA STOCKS: China & HK Equities Pare Earlier Gains Ahead Of Xi & Ma Meeting
Chinese and Hong Kong stocks are trading mixed today, there was early strength in tech stocks, however we have since seen the move higher been completely erased, the move came after headlines came out earlier stating President Xi will meet with Jack Ma, with traders now awaiting details. The earlier move higher in tech came following DeepSeek’s breakthroughs in AI have fueled bullish sentiment, with major players like Tencent, Alibaba Health, and Ping An Healthcare surging. Earlier, Tencent jumped 7.8% as its Weixin app began beta testing with DeepSeek, while healthcare AI stocks soared on expectations of improved margins and efficiency.
- Strategists at Goldman Sachs, Morgan Stanley, and JPMorgan have turned increasingly bullish on Chinese equities, forecasting further gains. Hong Kong’s options market is seeing record trading volumes, as investors pile into tech and EV bets, pushing the Hang Seng Tech Index to its highest level since 2022, with the Index up 0.40% today.
- Key Chinese entrepreneurs including Ma have been invited to meet the nation’s top leaders this week, which is seen as the next catalyst to extend the rally in China’s stocks.
- Meanwhile, geopolitical concerns remain a headwind, with US tariffs and trade tensions in focus. The HSI Volatility Index has jumped 5pts in February, reflecting renewed market swings. However, the shift in sentiment post-DeepSeek suggests China’s tech sector is now viewed as a legitimate competitor in the AI race, attracting fresh investor flows.
- Key benchmarks in the region are currently: HSI -0.25%, HS China Enterprise -0.45%, HS Property, +0.40%, CSI 300 +0.05%, CSI 2000 +1.45%, while the Nasdaq Golden Dragon Index rose 2.27% on Friday.
ASIA STOCKS: Asia Sees Outflows Across The Region Last Week
Large outflows in Taiwan on Friday, as TSMC dropped 2.75%. India continues to see outflows as we now close in on almost $11b of outflows for the year. There wasn't a single region who saw inflows the past week.
- South Korea: Recorded -$87m in outflows on Friday, bringing the 5-day total to -$154m. YTD flows remain negative at -$1.37b. The 5-day average is -$31m, better than the 20-day average of -$76m but worse than the 100-day average of -$120m.
- Taiwan: Posted -$754m in outflows on Friday, bringing the 5-day total to -$1.09b. YTD flows remain negative at -$3.13b. The 5-day average is -$219m, slightly worse than the 20-day average of -$197m and significantly worse than the 100-day average of -$55m.
- India: Recorded -$253m in outflows on Thursday, bringing the 5-day total to -$1.60b. YTD outflows remain heavy at -$10.86b. The 5-day average is -$320m, close to the 20-day average of -$316m and worse than the 100-day average of -$205m.
- Indonesia: Posted -$36m in outflows on Friday, bringing the 5-day total to -$184m. YTD flows remain negative at -$646m. The 5-day average is -$37m, worse than the 20-day average of -$20m and the 100-day average of -$29m.
- Thailand: Saw +$24m in inflows on Friday, bringing the 5-day total to -$2m. YTD flows remain negative at -$289m. The 5-day average is $0m, better than the 20-day average of -$5m and the 100-day average of -$18m.
- Malaysia: Registered -$25m in outflows on Friday, bringing the 5-day total to -$25m. YTD flows are negative at -$785m. The 5-day average is -$5m, better than the 20-day average of -$26m but slightly worse than the 100-day average of -$27m.
- Philippines: Recorded -$10m in outflows on Friday, bringing the 5-day total to -$43m. YTD flows remain negative at -$129m. The 5-day average is -$9m, worse than the 20-day average of -$2m and the 100-day average of -$3m.
Table 1: EM Asia Equity Flows
OIL: Crude Makes Up Earlier Losses To Be Little Changed Today
Oil prices are off their intraday lows to be little changed today. Brent is up 0.1% to $74.81/bbl after a low of $74.19, while WTI is flat at $70.73 following a trough of $70.12. Brent held above support at $74.10 but WTI traded below it at $70.43 but has since recovered. Oil prices have struggled on developments suggesting greater supply. The USD index is down 0.1%.
- There has been increased talk of negotiations for a truce to bring peace to Ukraine which may ease sanctions on Russia and allow it to export more fossil fuels. Currently, a deal is a long way off though, with concerns that Ukraine is being excluded from talks between the US and Russia.
- There have also been positive developments in Iraq with the president of its Kurdistan region saying that the area should be able to export crude from the end of March after a two year dispute. This could add up to 300kbd to global supplies.
- Later the Fed’s Harker, Bowman and Waller speak, while there isn’t any US data due to the Presidents Day holiday. Euro area December trade data print and the Eurogroup meeting takes place.
INDONESIA: Trade Data Much Weaker than Expected in January.
- Indonesia’s January exports were down in December’s number and significantly lower than market forecasts.
- At +4.68% for January, this missed December’s outcome of +4.78% and were significantly below market forecasts of 7.40%.
- Imports were more worrying in January declining -2.67%, from +11.06% in December and market expectations of +9.94%.
- The upshot in the weak data release was a much stronger trade surplus of $3,450m, though in an environment where the US President is focusing on countries with surpluses, this may not be viewed favorably.
- For both the export release and imports, the volatile sub sector was oil and gas which fell dramatically for both exports and imports.
- Total exports for January for Crude Oil YoY declined -54%, compared to December’s rise of 104%.
- Indonesia’s gross external debt rose to $424.8bn in December, from $424.1bn in January.
- The Non-oil export figures show a significant decline in exports to China, down by -21.06% - most likely impacted by the Lunar New Year holidays
- Exports to US declined also by -4.85%, from +5.00% in December.
- Exports to Japan declined -18.25% from -2.57% in December.
- Non-oil imports from the US jumped +7.80% from a -11.99% decline in December.
ASIA FX: Most USD/Asia Pairs Lower, THB & PHP Lag
USD/Asia pairs are mostly lower for the session, but away from best levels. This is in line with USD weakness from Friday, which has carried over into the majors today. Regional equity sentiment has been mixed though. THB and PHP have lagged broader USD/Asia trends today.
- The China currency is firmer, with USD/ CNH getting to lows of 7.2427, but we sit higher now, last near 7.2500. A meeting between China President Xi and key private sector business leaders is driving hopes of closer ties between the government and the private sector. However, markets are away from best levels in the equity space. The CSI 300 last around flat.
- USD/KRW spot has been supported under 1440 in the first part of Monday dealings. We were last near 1441.5, little changed for the session. USD/TWD is lower, but likewise has been supported under 32.70. This is close to fresh lows for the month.
- In SEA, USD/THB is a little firmer, last close to 33.70. Earlier we had Q4 GDP come in a little softer than forecast, while local equities have been weaker, off around 1.8%. A local group stated now was not the time for the BoT to ease, but that it should reverse policy space.
- USD/PHP is also a little higher, edging back towards 58.00. Earlier lows in this pair sit just under 57.80.
- USD/IDR got to 16180 in the first part of trade, but sits higher now, last near 16220, still up 0.25% in IDR terms versus end Friday levels. Earlier trade data was mixed, with export growth weaker than forecast, along with imports but the trade surplus was higher at near $3.5bn.
CHINA: Country Wrap: Data Out Shows Bond Market’s Rapid Development.
- Chinese President Xi hosted Jack Ma and other leading entrepreneurs today in what is seen as a dramatic thawing of relations between the government and the tech sector. The meeting shows that following the crackdown on the sector in 2020, the relationships are now changing with the Communist Party needing to be more supportive of private sector companies to achieve their growth targets. (source: MNI- Market News).
- Over the weekend the Shanghai Security News reported on the explosion of growth of bond ETF’s in China. Analysis shows that the market now has 29 bond ETFs in existence, with the size of the funds now exceeding CNY200bn, having been only CNY100bn mid-year last year. (source: MNI- Market News).
- At a conference the Conference for Emerging Market Economies organized by the Saudi Ministry of Finance and the International Monetary Fund in Saudi Arabia over the weekend, the PBOC Governor Pan spoke to the risks for emerging markets and the policy direction for China domestically. On the domestic front, Pan indicated that more proactive fiscal policies can be expected and more accommodative monetary policy with the latter focused on boosting domestic consumption. (source: MNI- Market News).
- A poor start to the week with the Hang Seng leading markets down, by -0.50%, CSI 300 –0.08%, Shanghai -0.07% with Shenzhen the only bright spot up +0.40%.
- CNY: Yuan Reference Rate at 7.1702 Per USD; Estimate 7.2653
- Bonds: there was a pushback in the bond market today with the CGB 10YR rising +2.2bps to 1.67%.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 17/02/2025 | 0700/0800 | ** |  SE | Unemployment |
| 17/02/2025 | 0800/0900 |  CH | Flash GDP | |
| 17/02/2025 | 1000/1100 | * |  EU | Trade Balance |
| 17/02/2025 | - | EU | ECB's Lagarde and Cipolllone in Eurogroup meeting | |
| 17/02/2025 | 1315/0815 | ** |  CA | CMHC Housing Starts |
| 17/02/2025 | 1330/0830 | * | CA | International Canadian Transaction in Securities |
| 17/02/2025 | 1430/0930 |  US | Philadelphia Fed's Pat Harker | |
| 17/02/2025 | 1520/1020 | US | Fed Governor Michelle Bowman | |
| 17/02/2025 | 2300/1800 | US | Fed Governor Christopher Waller | |
| 18/02/2025 | 0330/1430 | *** |  AU | RBA Rate Decision |
| 18/02/2025 | 0700/0700 | *** |  GB | Labour Market Survey |
| 18/02/2025 | 0700/0800 | *** | SE | Inflation Report |
| 18/02/2025 | 0745/0845 | *** |  FR | HICP (f) |
| 18/02/2025 | 0930/0930 | GB | BOE's Bailey fireside chat on open financial markets | |
| 18/02/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 18/02/2025 | 1000/1100 | *** |  DE | ZEW Current Expectations Index |
| 18/02/2025 | - | EU | ECB's De Guindos in ECOFIN meeting | |
| 18/02/2025 | 1330/0830 | *** | CA | CPI |
| 18/02/2025 | 1330/0830 | ** | US | Empire State Manufacturing Survey |
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