- US Tsys are little changed today, likewise for JGBs. In Japan OIS market expectations indicate: an 88% probability of a 25bp hike in January.
- This hasn't help the yen much today though, which along with the rest of the G10, has lost a little ground against the dollar. Yen is still comfortably higher for the week.
- China data, including Q4 GDP, was mostly better than forecast, with the 2024 growth target met. We have seen China equities rise, but little impact elsewhere.
- Looking ahead, it is a reasonably quiet end to the week data wise, with UK retail sales on tap, final Dec CPI for the EU, while in the US housing starts and IP are due.
MARKETS
US TSYS: Tsys Curve Flattens Slightly, Nomura Sees 10yr Potentially Reaching 6%
- Tsys are little changed today, futures are trading within Thursday's ranges TU is unchanged at 102-25¾, while TY is -00+ 108-19 holding above the 20-day EMA. Cash tsys curves have flattened throughout the session with the 2yr +0.4bps at 4.232%, while the 10yr is -0.4bps.
- In tsys flows today, the stand out was a large TY call buyer, 20,000 TYG5 108.75 for '18, there was also a smaller TY call buyer of TYG5 109.5 for '06
- The 2s10s hit its highest levels since mid 2022 on Tuesday, we now trade about 5bps off those highs at 37.204. While the 2s5s30s Fly has seen it's largest 2-day move in a year, last -29.5bps
- Nomura economists project 10yr yields could reach 6% this year, citing their relatively low levels compared to inflation and the fiscal deficit. The US faces its worst cyclically adjusted deficit-inflation combination since 1960, compounded by Trump's nationalistic policies, which may exploit the dollar's reserve currency status. With limited scope to reduce the deficit and significant refinancing needs, gross Treasury issuance could hit 17% of GDP.
- Projected rate cuts through mid-2025 have regained traction after cooling this morning, current lvls vs. Thursday Morning* as follows: Jan'25 steady at -0.7bp, Mar'25 at -8.3bp (-6.3bp), May'25 -14bp (-11.8bp), Jun'25 -24.8bp (-20.4bp), Jul'25 at -28.7bp (-23.7bp).
- Fed-dated OIS is now pricing in 41.8bp of combined easing for the year vs. 38bp priced Thursday morning.
- Later today we have Housing Starts, Building Permits, Industrial Production, while the Fed enters their self imposed media Blackout at midnight Friday through January 30
STIR: $-Bloc Markets Firm Over the Past Week led By NZ
In the $-bloc, rate expectations through December 2025 have firmed by 1-24bps since last week’s stronger-than-expected US non-farm payrolls data for December. The firming has been led by New Zealand (+24bps) and Canada (+11bps), while Australia and the US saw more modest gains of 1-2bps.
- Looking ahead to December 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 3.92%, -42bps; Canada (BOC): 2.76%, -49bps; Australia (RBA): 3.60%, -72bps; and New Zealand (RBNZ): 3.16%, -109bps.
Figure 1: $-Bloc STIR (%)
Source: MNI – Market News / Bloomberg
JGBS: Cash Bonds Hold Their Bull-Flattener On Data-Light Session
JGB futures are little changed after giving up overnight strength, currently flat compared to settlement levels, on a data-light session.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s extension of the post-CPI rally.
- The BoJ board will consider hiking the policy rate to 0.5% when it meets next week due to strong wage growth momentum, but it sees no issue holding the rate steady should market volatility increase following President-elect Donald Trump’s inauguration on Jan 20, MNI understands.
- OIS market expectations indicate: an 88% probability of a 25bp hike in January; a cumulative 92% chance by March; and a full 25bp increase fully priced in by May 2025 (105%).
- Cash JGBs are 1-4bps richer across benchmarks beyond the 1-year. The benchmark 10-year yield is 0.9bps lower at 1.198% versus the cycle high of 1.262%, set this week.
- Swap rates are flat to 2bps lower. Swap spreads are wider.
- On Monday, the local calendar will see Core Machine Orders, Industrial Production, Capacity Utilization and the Tertiary Industry Index.
AUSSIE BONDS: Subdue Session, Light Local Calendar Next Week
ACGBs (YM flat & XM -0.5) are little changed after dealing in narrow ranges in today’s data-light Sydney session.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s extension of the post-CPI rally.
- Cash ACGBs are unchanged with the AU-US 10-year yield differential at -11bps.
- Swap rates are flat to 1bp higher with the 3s10s curve flatter.
- The bills strip is cheaper, with pricing beyond the first contract -2 to -3.
- The Australian job market remains tight but at levels that are in line with inflation returning to the RBA's 2% to 3% target band, ANZ Research. (MTN)
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (105%), with the probability of a February cut at 67% (based on an effective cash rate of 4.34%).
- The local calendar is light next week, with the highlights being the Westpac Leading Index on Wednesday and S&P Global PMIs (P) on Friday.
- Next week, the AOFM plans to sell A$300mn of the 4.25% 21 June 2034 bond on Monday, A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 1.50% 21 June 2031 bond on Friday.
BONDS: NZGBS: Finished Slightly Mixed, Underperformance To $-Bloc Continued
NZGBs ended the session slightly mixed, with the 2-year yield rising by 2bps, while the 10-year yield declined by 1bp.
- The underperformance of the NZGB 10-year relative to its $-bloc counterparts persisted, as the NZ-US and NZ-AU yield differentials widened by 4bps and 2bps, respectively. Over the past week, the NZ-US differential has expanded by 20bps, recovering from its lowest level since late 2020. Similarly, the NZ-AU differential has widened by 16bps during the same period.
- This occurred despite NZ’s manufacturing activity remaining subdued in December, marking 22 consecutive months of contraction—the longest streak since the global financial crisis, excluding the pandemic. The BusinessNZ PMI for December registered at 45.9, a slight improvement from 45.2 in November, but still well below the 50-point threshold indicating expansion.
- Swap rates closed unchanged, 3-4bps higher than the session’s lows.
- RBNZ dated OIS pricing closed little changed. 46bps of easing is priced for February, with a cumulative 109bps by November 2025. With respect to end-2025 rate expectations, NZ has been the $-blocs worst performer, with the expected OCR some 25bps firmer than last Friday’s close.
FOREX: USD Ticking Higher, Yen Outperformer On The Week
The first part of Friday trade has seen a modestly positive USD bias, but moves haven't been large. The USD BBDXY index sits near 1313.2 in latest dealings, little changed versus end NY levels from Thursday.
- There has been some JPY vol, as markets price in strong odds of a rate hike at next week's policy meeting (announced on Friday the 24th). We saw lows of 154.98, but the pair quickly recovered. This was just ahead of the 50-day EMA (154.90). We last tracked near 155.40/45, close to session highs (155.50).
- Yen is close to 0.15% weaker for the session, but still up around 1.50% for the week, the best G10 performer. The shift in BoJ pricing, coupled with lower core yields, have been clear yen positives over this period.
- AUD/USD saw a modest uptick on better China activity data (GDP, IP and retail sales), but upside momentum proved fleeting. The pair was last near 0.6200, off around 0.20%. NZD/USD is back under 0.5600 , off around 0.20% as well. The Dec PMI ticked up, but remains comfortably in contraction territory. Next week we get NZ Q4 CPI. In Australia, the data calendar remains light.
- In the cross asset space, US equity futures are up around 0.20%, while US yields are little changed. Regional equities are mixed. China and HK markets are up at the break, but gains are less than 0.50%. The aforementioned China data may be helping equity sentiment. Japan is lower, along with Australia.
- Looking ahead, it is a reasonably quiet end to the week data wise, with UK retail sales on tap, final Dec CPI for the EU, while in the US housing starts and IP are due.
JAPAN DATA: Local Investors Buy Both Offshore Bonds & Stocks
Offshore flows for Japan stocks and bonds were mixed for the week ending Jan 10. We saw a modest rise in terms of flows into local stocks after a tepid start to the year, see the table below. This doesn't offset the tail end outflow pressures we saw towards the end of 2024 though. Net selling of local bonds resumed though, which has been evident 3 out the last 4 weeks.
- In terms of Japan outbound flows, local investors bought offshore bonds. This goes against the general trend of net selling of this segment from Q4 last year as elevated US yields weighed on global bond returns.
- Local investors continued to add to offshore equity holding, the fifth straight week of net buying for this segment.
Table 1: Japan Offshore Weekly Investment Flows
| Billion Yen | Week ending Jan 10 | Prior Week |
| Foreign Buying Japan Stocks | 313.3 | -74 |
| Foreign Buying Japan Bonds | -501.2 | 154.8 |
| Japan Buying Foreign Bonds | 756.7 | -332.3 |
| Japan Buying Foreign Stocks | 589.1 | 325.1 |
Source: MNI - Market News/Bloomberg
ASIA STOCKS: China Equities Edge Higher Following Positive Data
The Chinese market is stabilizing after initial losses, with the CSI 300 index is 0.45% higher following a 0.5% drop earlier. Telecom and consumer discretionary stocks led declines, while consumer staples, materials & Tech stocks have shown resilience. China's economy met its 2024 growth target of 5% after a strong Q4, supported by a stimulus push and export strength ahead of potential U.S. tariffs. However, risks remain, as Donald Trump’s impending return to the White House raises fears of tariff hikes, which could significantly impact trade—a key growth driver.
- Despite positive GDP data, challenges persist. Industrial production grew 6.2% in December, driven by export front-loading, but domestic demand remains weak, with retail sales underperforming at 3.7% growth and unemployment rising to 5.1%. The property sector continues to drag on the economy, with investment contracting 10.6% in 2024—its worst performance since records began. Efforts to stabilize the housing market have yielded marginal improvements in home prices, but concerns remain high, particularly as state-backed developer China Vanke faces mounting debt and falling investor confidence.
- Although the property related data showed further contraction, prices fell at slower pace, China property indices are trading higher today, with the BBG China Property Index up 1.05%, although China Vanke is drag, trading 6.20% lower following headlines that the CEO has been detained by police. Other major benchmarks are higher with Mainland Property Index up 1.60%, while HS Property Index trades 1.65% higher.
- The Hang Seng is so far holding onto gains made over the past week, trading 4.30% off Jan 13 lows, although still 2.76% lower in Jan.
- Beijing’s fiscal policy is expected to take center stage in 2025, with measures to stimulate growth while navigating deflationary pressures and potential capital outflows. Analysts note that sustaining momentum will require balancing external risks and further domestic reforms.
ASIA STOCKS: Asian Equities Mostly Lower, Outflows In EM Asia Continue
- South Korea's Kospi declined 0.2% as investors balanced optimism over returning foreign funds with lingering political uncertainty, South Korea equities are the only market in Asia to report net inflows this year. A Bloomberg Fear/Greed indicator suggests a shift toward bullish sentiment, with the Kospi up 5% year-to-date after six months of declines, however there index is tied closely to the performance of Samsung which is down 40% from August 2024 highs.
- Taiwan's Taiex is up 0.20% today and has outperformed the MSCI Asia Pacific Index over the past few days, driven by TSMC’s strong earnings report, which exceeded forecasts for 2025 sales and capital expenditure. TSMC benefits from the AI spending boom despite uncertainties from the US-China tech conflict. Momentum is somewhat tied to Nvidia with the company's upcoming earnings in six weeks to be very closely watched, as any disappointment could ripple through the global tech sector, impacting sentiment. TSMC's US shares rose 3.9% on Thursday and trade flat today.
- Japanese equities have struggled today with the Topix falling 1.2% as expectations of a BoJ rate hike strengthened the yen, hitting exporters and chip stocks, the index has since recovered somewhat to trade down 0.70%, while the Nikkei is 0.70% lower. Nintendo dropped 7.2% after announcing a delayed release of its Switch 2 console, disappointing investors. Investors look to be positioning ahead of major events, including the BOJ meeting and US presidential inauguration which has added to the cautious tone.
- Australia's ASX 200 is 0.25% lower with mixed performance in the commodities sector. Rio Tinto declined following reports of early-stage merger talks with Glencore. Broader market sentiment reflected a lack of catalysts despite steady bond yields. New Zealand's NZX 50 closed 1% higher.
- Elsewhere across EM Asia, foreign investors have continued selling local equities, in particular Indian equities with that market seeing $4b of outflows so far this year, the Nifty 50 is 0.50% lower today and down 2% for Jan. Malaysia & Philippines have also seen heavy outflows with the Malay KLCI down 3.55% over the past week, while Philippines PSEi is 4.30% lower to be the worst performing market over the past week
ASIA STOCKS: Investors Return To Asian Equities As Semiconductors Rally
South Korea & Taiwan saw inflows on Thursday as Semiconductor stocks rose globally, while TSMC also reported quarterly earnings.
- South Korea: Recorded inflows of +$584m yesterday, contributing to a 5-day total of -$351m. YTD flows are positive at +$501m. The 5-day average is -$70m, worse than the 20-day average of +$3m but better than the 100-day average of -$149m.
- Taiwan: Registered inflows of +$993m yesterday, resulting in a 5-day total of -$2.44b. YTD flows are negative at -$2.53b. The 5-day average is -$488m, significantly worse than the 20-day average of -$206m and the 100-day average of -$128m.
- India: Posted outflows of -$508m Wednesday, contributing to a 5-day total of -$2.88b. YTD flows are negative at -$4.03b. The 5-day average is -$577m, worse than the 20-day average of -$280m and the 100-day average of -$62m.
- Indonesia: Recorded inflows of +$26m yesterday, with the 5-day total at -$12m. YTD flows are negative at -$181m. The 5-day average is -$2m, better than the 20-day average of -$20m and the 100-day average of +$4m.
- Thailand: Posted outflows of -$36m yesterday, resulting in a 5-day total of -$155m. YTD flows are negative at -$186m. The 5-day average is -$31m, worse than the 20-day average of -$11m and the 100-day average of -$8m.
- Malaysia: Experienced outflows of -$47m yesterday, contributing to a 5-day total of -$262m. YTD flows are negative at -$381m. The 5-day average is -$52m, worse than the 20-day average of -$26m and the 100-day average of -$17m.
- Philippines: Recorded outflows of -$19m yesterday, resulting in a 5-day total of -$56m. YTD flows are negative at -$80m. The 5-day average is -$11m, worse than the 20-day average of -$8m and equal to the 100-day average of $0m.
Table 1: EM Asia Equity Flows
Oil Delivers a Fourth Weekly Gain on Russian Sanction Risk.
- Oil came off near term highs overnight as speculation that the potential drop in supply from further Russian sanctions could see the release of up to 1.2m b/d of supply from OPEC+.
- As markets adjust to the news of Russian sanctions and seek to understand the new administration’s stance on them, what is clear is the incoming President’s focus on Canada and that raises the potential for tariffs on Canadian oil.
- News of a potential ceasefire between Israel and Hamas appears to be lacking support by key ministers in Israel yet at this stage is set to begin this coming Sunday.
- Oil’s ascent on Russian sanctions took a breather in overnight price action with WTI coming off the highs yesterday of US$80.77 to fall throughout the session to close at $78.77 before steadying at $79.09 during Asian trading day.
- For the week, WTI has gained +3.3%, marking a stellar run for the commodity in 2025.
- Brent saw highs yesterday of US$82.63 and fell gradually throughout the day to at $81.35 into the close, before steadying at $81.60.
- For the week, Brent too is up for the fourth successive week, by 2.2%.
- BP PLC announced that it will shed about 5% of its workforce and that it has stopped or paused up to 30 new projects to focus on existing ones that provide the most value add as its share price flounders relative to peers.
- Incoming nominee for Treasury secretary Scott Bessent said he would support the increased sanctions against Russia in a bid to end the Ukraine conflict.
- The increase in sanctions announced this week has seen evidence of a shift in demand dynamics with Saudi Aramaco receiving inquiries from Indian and Chinese buyers for their product whereas South Korean buyers are turning to the US.
Gold’s Love for Rate Cuts Sees Prices Rise.
- Gold prices rose to the highest levels since early December overnight.
- Back in December following the FED’s rate cut, uncertainty reigned in terms of the potential pathway for rate cuts as FED officials seemingly watered down the possibility for 2025.
- This week’s softer US inflation has stoked the rate cut fire again with bond yields gapping lower and taking the USD with it, giving a boost to gold which rose to a high yesterday of US$2,724.76 before closing at $2,714.31.
- Holdings in ETF’s backed by physical bullion have seen a resurgence in demand in January with total investment value up 0.5% YTD.
- Key Central Bank’s resumed purchases of gold late last year possibly on an interest rate view and expectations from traders is that this could continue.
CHINA: GDP Hits Targets, Focus Now on 2025.
- China fourth quarter GDP YoY was above consensus at +5.4% following 3Q release of +4.6% and indicates that stimulus measures are flowing through to the economy.
- The seasonally adjusted QoQ result of +1.6% was marginally down on expectations of +1.7%, but up on the revised prior number of +1.3%.
- In September of last year a determined push to revive the ailing economy saw multiple stimulus measures announced to ensure that the annualized, party led goal of 5% GDP growth was achieved.
- As the new year approaches the Chinese economy now appears to be on better footing to deal with the incoming President in the White House and the likely targeted policies he brings.
- With monetary policy now deemed accommodative, and expectations for a RRR cut near term to support interbank liquidity, policy makers bold measures last year appear to put Asia’s largest economy on a much more secure platform for the year ahead.
- Whilst industrial production and retail sales were very strong, property investment in December contracted -10.6% marking the end to the worst year in recorded history for the sector (note data goes back to 1987).
- Residential property sales contracted -17.6% for December (from -20.0% for November) new property sales by value down -17.1%, new home sales by area down -14.1%, new property construction down -23% and domestic loans for the property sector -6.1% YTD.
- Unemployment for urban areas remains stubbornly high at +5.1% in December, slightly up from the month prior.
CHINA: Industrial Production and Retail Sales Surprise to the Upside.
- Whilst China’s Industrial Production has remained resilient throughout the downturn in the economy, today’s upside surprise will be welcome signs for authorities that stimulus measures are helping the ailing economy.
- Industrial Production YoY for December rose +6.2% from +5.4% prior and ahead of expectations of +5.4% bringing the YTD number to +5.8% and the best print since April last year.
- With the property sector malaise weighing heavy on the consumer, all eyes were on Retail Sales for December and today’s print of +3.7% YoY was better than expected and higher than November’s result of +3.0%.
- By product, industrial production saw chip production up +12.5% YoY, vehicle sales of +15.2% (with a modest decline in electric vehicle sales) and crude steel output jumping by +11.8%.
- Fixed Asset investments continued to rise up +3.2%, driven entirely by state owned expenditure.
CHINA: House Price Trends Continue to Improve. (UPDATED).
- Further signs that the impact of the various stimulus measures are flowing through to the property sector were evidenced in the December New and Used House price data released today.
- China New Home Prices MoM -0.084% vs prior -0.201%
- China Used Home Prices MoM -0.314% vs prior -0.347%
- For both new and used prices, this is the fourth consecutive month of improvement with new home price declines the least since June 2023.
- Of the 70 cities surveyed, 23 cities saw new prices rise for the month versus only 17 in November and there are now 2 cities up YoY.
- Of the 70 cities surveyed, 9 cities saw used prices rise for the month versus 10 in November, whilst no cities have risen year on year.
- Beijing saw new home prices -0.1% for the month, but the YoY figures of-5.4% are a reminder of the challenges ahead.
- Shanghai saw new home prices +0.5% for the month, and are now up+5.3% YoY.
- Beijing used home prices rose +0.5% for the moth, whilst Shanghai +0.9%.
ASIA FX: Won Outperforms Past Week, High Yielders Falter
Asian FX markets sit close to unchanged in the first part of Friday dealing. USD/CNH moved a little lower, but there was no follow through. Baht spot has played catch up with some USD weakness post yesterday's onshore close. KRW has edged higher but remains within recent ranges.
- In the past week, rends for the region are mixed. High yielders are the underperformers. USD/IDR was last near 16370, off 1.1% in the past week, as the BI surprised the market with a 25bps cut, as focus shifted to growth and not FX stability. USD/INR is up to 86.55/60, just short of record highs, as the RBI accepts more FX weakness.
- USD/CNH drifted under 7.3400 but found support. We had the Q4 GDP release and monthly activity figures for Dec come in better than expected. The GDP target for 2024 was met, but IP activity still outpaced retail sales. Housing sales improved modestly, as did prices, but activity looks depressed. Spot USD/CNY is back under 7.3300, but like CNH has seen limited follow through. Markets are also likely wary of Trump's inauguration a the start of next week, and what shifts we may see in US tariff/trade policy.
- Spot USD/KRW sits a little lower, last near 1456. The won has outperformed this past week, up 1%. NPS hedging has likely helped, and while BoK surprised with no rate change, the bias is clearly towards easier settings.
- USD/SGD is around 1.3670, little changed today. Dec exports were better than forecast. Next Friday delivers the MAS policy statement, where easing risks have been building.
- USD/MYR hold close to 4.5000, little changed as well. Q4 GDP was a little below expectations.
- USD/THB is back to 34.45/50, fresh lows since the first week of the year. Th Thailand PM remained positive on the tourism outlook, noting arrivals from China are +20% y/y for Jan 1-16.
MALAYSIA: GDP Below Expectations Opening Door for the BNM in 2025.
- Malaysia fourth quarter GDP printed at +4.8%, below expectations of +5.2% and down from +5.3% in 3Q.
- Malaysia’s economy has remained robust in 2024, despite the currency experiencing a challenging environment in the last part of the year from a resurgent USD.
- Malaysia’s economy is supported by a robust services and manufacturing sector although manufacturing is showing signs of softening.
- Unexpectedly also, the agricultural sector contracted primarily driven by the volatility in the palm oil sector.
- Construction remains robust and it remains to be seen if the BNM now comes into play in the early part of the year as volatility is expected to increase.
- Markets gave a muted response to the data with the currency stable and bonds already higher in yields in the morning session.
- The BNM has flexibility to act should the economy soften but at this stage appears likely to be patient to see what impact the US government will have on trade in the region.
Table of Contents
SINGAPORE: Dec Exports Firmer Than Forecast, Next Thursday Inflation Prints
Singapore Dec exports surprised on the upside, non-oil exports up 1.7%m/m, versus -0.8% forecast (prior was 14.7%). In y/y terms we rose 9.0%, also above the 7.4% forecast (prior 3.4%). Electronic exports were up 18.6%, slightly down from the Nov 23.1% pace. Non-electronic exports were up 6.6%y/y, versus -1.6% in Nov.
- Like other export orientated economies, Singapore saw better export growth momentum to the tail end of 2024, see the chart below (Singapore is the grey line). Part of this may reflects efforts to front load shipments ahead potential US tariff/trade action. For Dec, Singapore exports to the US rose 30.7%y/y. We were negative in terms of exports to the EU and China in y/y terms.
- A firmer picture on underlying trends may not emerge until we progress through Q1 of this year.
- The data won't add much to the case for a MAS easing at the Jan meeting. Market expectations have been rising for a shift around a reduced pace of SGD NEER appreciation, with the NEER now around -1.5% away from the top end of the band (per Goldman Sachs estimates).
- Note next Thursday we get the Dec inflation print, with recent prints coming in below market expectations. Core y/y was sub 2.0% For Nov.
Fig 1: Key Asian Export Trends Y/Y
Source: MNI - Market News/Bloomberg
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 17/01/2025 | 0700/0700 | *** |  GB | Retail Sales |
| 17/01/2025 | 0900/1000 | ** |  EU | EZ Current Account |
| 17/01/2025 | 1000/1100 | *** | EU | HICP (f) |
| 17/01/2025 | 1100/1200 | EU | ECB's Cipollone lecture at Crypto Asset Lab conference | |
| 17/01/2025 | 1330/0830 | * |  CA | International Canadian Transaction in Securities |
| 17/01/2025 | 1330/0830 | *** |  US | Housing Starts |
| 17/01/2025 | 1415/0915 | *** | US | Industrial Production |
| 17/01/2025 | 1600/1100 | CA | BOC releases review of pandemic policy actions. | |
| 17/01/2025 | 2100/1600 | ** | US | TICS |
| 17/01/2025 | 2100/2100 | GB | BOE's Bailey Remarks at the Bretton Woods Institutions |
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