MNI EUROPEAN OPEN: HK/China Equity Bounce Drives NZD & AUD Gains

US TSYS: Treasuries Remain Rangebound Ahead of FOMC Minutes

TYH4 is currently trading at 109-31+, up - 01+ from New York closing levels
Treasury futures have opened slightly weaker in early trading, however have now recovered to trade slightly higher for the day and remain comfortably inside Tuesday's ranges. There has been very little in the way of market headlines, Hong Kong and Chinese equities have soared after further government and policy support.

• Mar'24 10Y Futures have been trading in tight ranges, lows of 109-27 and highs of 110. Initial resistance is 110-17 (Feb 15 high), while support holds at 109-17/15 (50.0% of Oct 19 - Dec 27 climb / Low Feb 16).
• Yield curves have continued the steepening trend from Tuesday with yields moving lower throughout Asia trading, with the 2Y yield -2.1bps lower to 4.591%, 10Y yield -0.6bp lower to 4.269%, while the 2y10y is +1.544 at -32.355
• Looking ahead later today Main focused will be on the FOMC minutes, while MBA Mortgage Applications, Chicago Fed Nat Activity Index, Jobless Claims, S&P Global US PMI, and New & Existing Home Sales will also be out.

JGBS: Twist-Flattener, Climate Transition Bond Included In BoJ’s Rinban Operations

JGB futures are flat in the Tokyo afternoon session and are sitting in the middle of today’s range, unchanged compared to the settlement level.

• There hasn’t been much in the way of domestic drivers to flag, outside of Trade Balance data. Machine Tool Orders data is due later.
• The results of today’s BoJ Rinban operations covering 1-10-year JGBs showed mixed results. The 1-3 and 3-5-year buckets saw positive spreads and higher offer cover ratios, but the 5-10-year bucket saw a small negative spread and a lower cover ratio versus the last outing.
• The BoJ included the nation’s first climate-transition government note in today's debt-purchase operation. Japan sold its first climate transition note on Feb. 14.
• The cash JGB curve has twist-flattened, pivoting at the 10s, with yields 2bps higher (1-year) to 4.5bps lower (40-year). The benchmark 20-year yield is 2.7bps lower at 1.462%, extending yesterday’s post-supply rally.
• The swaps curve has slightly bull-flattened, with rates flat to 2bps lower. Swap spreads are mostly wider.
• Tomorrow, the local calendar sees Weekly International Investment Flows, Jibun Bank PMIs (Preliminary) and Dept Store Sales. The MoF will also conduct a Liquidity Enhancement Auction for 5-15.5-year OTR JGBs.

AUSSIE BONDS: Slightly Richer, Limited Impact From Wages Data

ACGBs (YM +2.0 & XM +1.0) are sitting slightly stronger. The market’s focal point today was the release of the Wages Price Index (WPI) for Q4. The WPI was largely in line with expectations, printing a rise of 0.9% q/q (estimate +0.9%) in Q4 versus +1.3% in Q3. Wage price index rose 4.2% y/y in Q4 (estimate +4.1%) versus revised +4.1% in Q3. The annual rate was the fastest in almost 15 years and positive in real terms.

• The RBA is currently not concerned about wages but that depends on a productivity improvement. It stated that productivity not recovering “as assumed” was a “material risk”. Without that growth, current wage rates are too high to achieve the inflation target.
• Michelle Marquardt, ABS head of prices statistics, said: “For both the public and private sector, wage growth was driven by organisation-wide annual wage and salary reviews.”
• Cash ACGBs are 1-2bp richer on the day, with the AU-US 10-year yield differential +1bp at -10bps.
• Swap rates are 1-2bps lower on the day, with the 3s10s curve steeper.
• The bills strip is richer, with pricing flat to +3.
• RBA-dated OIS pricing is little changed on the day. A cumulative 40bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Judo Bank PMIs (Preliminary) for February.

NZGBS: Closed Little Changed, New May-54 Bond Issued

NZGBs closed flat to 2bps richer and in the middle of today’s ranges. There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined PPI data.

• Cash US tsys are dealing flat to 2bp richer in today’s Asia-Pac session, with a steepening bias present.
• Swap rates closed 1bp higher.
• RBNZ dated OIS pricing is 1-5bps softer for meetings beyond April. A cumulative 42bps of easing is priced by year-end.
• NZ Treasury issued NZ$4bn of new May 2054 NZGB via syndication today. The bonds, which carry a coupon of 5.00%, were issued at a spread of 1bp over the May 2051 nominal bond, at a yield to maturity of 5.0925%. It is noteworthy that the issue was launched with a guidance of -1 to +6 bps over 2051 bond, with an issuance cap of NZ$4b.
• Tomorrow, the local calendar will see Trade Balance data for January.

FOREX: NZD & AUD Outperform JPY On Firmer HK/China Equities

The BBDXY sits lower, last under 1242, with NZD and AUD outperforming amid a strong rally in Hong Kong and China equities.

• The equity rally was led by tech and property names in Hong Kong and China. The rest of the region has seen more mixed equity sentiment, while US futures sit down modestly.
• US yields sit down modestly, continuing the theme from Tuesday trade. Front end 2yr yields are down by 2bps to 4.59%, as the FOMC Minutes print later.
• NZD has had a slightly stronger beta to the HK/China equity risk on move. NZD/USD sits up 0.35%, last near 0.6190. This is very close to Tuesday highs, although we haven't been able to breach this level yet.
• AUD/USD has rallied 0.30% to 0.6565/70. At the margin, the weakness in iron ore prices may be curbing gains, although the Singapore benchmark is back to $122.5/ton today. The AUD/NZD cross is not too far from the 1.0600 level (last near 1.0615).
• Earlier data showed Q4 AU wages close to expectations. We were +4.2% in y/y terms, the fastest pace in almost 15 years. The RBA is currently not concerned re wages but that depends on productivity improving. It stated that productivity not recovering “as assumed” was a “material risk”. Without that growth, current wage rates are too high to achieve the inflation target.
• USD/JPY has tracked narrow ranges, last near 150.00, little changed for the session. We may be seeing some underperformance relative to AUD and NZD, given HK/China equity gains.
• Looking ahead, the Fed’s Bostic, Collins and Barkin speak plus the January Fed meeting minutes are published. The ECB’s Tuominen and Fernandez-Bollo, Bundesbank’s Nagel and BoE’s Dhingra make appearances.

CHINA/HONG KONG EQUITIES: Hong Kong and Chinese Stocks Surge on Market Stabilization Measures

• As we head into Asia lunch, markets are higher across the board after a slow start on the open. Hong Kong equites outperform mainland equities, the HSI is up 3.00% after initially opening down 0.70% and bouncing off the 50-day SMA, HSTech index has brushed up broader market weakness on tech names to trade up 4.48%, while the Mainland property index is 4.00% higher.
• China mainland equities are higher today, although have underperformed vs Hong Kong, the CSI 300 is up 1.80%, while the ChiNext is up 1.28%
• Property names are being supported by the yesterday's announcement that Chinese banks had approved 123.6b yuan of loans for property projects since January and had started issuing the funds. While Hong Kong’s developer association and politicians are putting pressure on the government to remove extra property levies ahead of the budget planning announcement next week.
• China's major stock exchanges froze the accounts of quantitative hedge fund Ningbo Lingjun Investment Management for three days after it rapidly sold 2.57 billion yuan ($360 million) in shares, disrupting normal trading order. Chinese regulators are increasing scrutiny on quant funds amid concerns about market volatility, prompting the exchanges to tighten supervision and extend reporting scope to include northbound investors via the mainland to Hong Kong stock connect.
• Finally Market participants are reportedly discussing the potential suspension of Chinese onshore stock listings as authorities further look to stabilize the domestic market. There is division among participants on whether to halt IPOs, however consensus remains for regulators to maintain stringent thresholds and boost oversight in the listing process
• Looking ahead to Thursday and China has Swift Global Payments data out, while Hong Kong will have CPI data.

ASIA PAC EQUITIES: Regional Asian Equities Lower Amid Tech Slide, Eyes on Nvidia Earnings

Regional Asian Equities are lower today after technology stocks led Wall Street broadly lower on Tuesday, with investors waiting for chipmaker Nvidia's quarter-earning report. There was little in the way of economic data or market headlines today.

• Japan equities are lower today as tech stocks; the semiconductor index slipped 1.6% during the US session on Tuesday. Softbank, down 2.00%, has contributed to most of the decline in the Topix, which is off 0.30%, while the Nikkei 225 trades 0.28% lower. Japan's January export data surprised to the upside, hitting 11.9% vs. the expected 9.5%, led mostly by demand from chip-making machinery in China.
• Taiwan equities are lower today, weighed down by tech, especially semiconductor stocks. TMSC, down 0.87%, has contributed the most to the fall in the Taiex, which is down 0.37%.
• South Korean equities are also lower today as tech names pull the market down; foreign equity outflows have also increased today, totaling -173.7 million in outflows so far today, marking the highest outflow day since Jan 17th. The KOSPI currently trades 0.13% lower.
• In Australia today, wage growth data was out, beating expectations, coming in at 4.2% vs. 4.1%. Equities were lower today, with miners contributing to the bulk of the weakness as the price of iron ore declines on the back of China's outlook demand. The ASX200 finished down 0.77%.
• Elsewhere in SEA, New Zealand Equities finished the day higher, up 0.17%, while Thailand equities are higher, up 1% after the PM called for rate cuts.

OIL: Crude Higher As Commodities Rally On China Optimism

Oil prices are moderately higher today during APAC trading after falling over a percent on Tuesday as commodities have benefited from stronger HK/China equities and a weaker greenback (USD index -0.1%). Geopolitical issues also persist. WTI is up 0.3% to $77.28/bbl and Brent +0.3% to $82.62, both close to their intraday highs.

• Higher oil prices and shipping costs from conflict in the Middle East and attacks on shipping in the Red Sea have resulted in an increase in petrol prices with the UK’s RAC reporting fuel prices rising by at least 2% in the first half of February. Australian petrol prices are almost 4% higher since the end of January.
• There were reports today from the UK navy of increased drone activity just north of the Bab al-Mandab Strait.
• The bullish Brent prompt spread has expanded, according to Bloomberg.
• US inventory data has been volatile since a cold snap disrupted oil output and refining. Data for the latest week is released by API later today.
• Later the Fed’s Bostic, Collins and Barkin speak plus the January Fed meeting minutes are published, which oil markets will monitor closely for signs of a willingness to ease. The ECB’s Tuominen and Fernandez-Bollo, Bundesbank’s Nagel and BoE’s Dhingra make appearances.

GOLD: Fourth Day Of Gains Ahead Of FOMC Minutes

Gold is 0.2% higher in the Asia-Pac session, after closing 0.4% higher at $2024.41 on Tuesday.

• Tuesday’s move was the fourth consecutive day of gains as traders awaited the release of Federal Reserve minutes and remarks from policymakersthat may shed light on the path of interest rates.
• The market’s focus is now tuned to the release of the Federal Reserve minutes of its recent meeting on Wednesday.
• A handful of Fed speakers are also scheduled to speak this week. Among them, Minneapolis Fed chief Neel Kashkari will address economic trends and the outlook on Thursday. Fed Governor Christopher Waller is also due to speak on Thursday.
• Technically significant levels on the topside remain much further out. The yellow metal needs to clear resistance at $2065.5, the Feb 1 high, to reinstate a bullish theme.