AUSSIE BONDS: ACGB Jun-35 Supply Faces A Higher Yield & Steeper Curve

On Friday, CNH was in focus following headlines of a Trump/Xi phone call. Descriptions of a positive tone for China/US relations provided a boost for the Chinese Yuan. USD/CNH fell from around 7.3580 to 7.3330 very quickly, before then stabilizing. The pair closed around 7.3415 on Friday, but we track a touch lower in early Monday dealings, last near 7.3360. For USD/CNH, we are close to the 20-day EMA support point, which rests at 7.3330. 

• Onshore USD/CNY spot ended near 7.3250 on Friday, while the CNY CFETS basket tracker was close to unchanged, ending last week at 101.35 (per BBG).
• CNH, and broader market sentiment, will remain very sensitive to any tariff related developments out of the US, with Trump's inauguration later. Focus will be on early Trump executive orders, with reports he will sign up to 100 orders on Day 1, by far the largest raft of actions ever taken by a new president. Trump could feasibly impose new tariffs on Day 1, by invoking authority under the International Emergency Economic Powers Act (IEEPA) of 1977.  Still, border security and immigration-related orders are likely to make up the bulk of Day 1 actions.
• Weekend reports also noted that Trump has told his advisors he would like to travel to China after taking office, although no final decision has been made on such a trip (per the WSJ). This will be a focus point over coming weeks, although yuan could still weaken in the interim on any fresh US tariff action.
• Outside of US developments, locally in China today we have the 1yr and 5yr loan prime rates. No change is expected in either rate, with the 1yr currently at 3.10%, the 5yr at 3.60%. 

ACGBs (YM -3.0 & XM -2.5) are slightly cheaper after US tsys finished on Friday with a modest bear-flattener, well off early session bests. The US 2-year yield finished 5bps higher at 4.29%, while the 10-year nudged 2bps higher to 4.63%. 

• Industrial production surprisingly jumped 0.9% M/M (cons 0.3) in December, while building permits were a little higher than expected.
• The cash US tsy market and stock exchanges are closed today for Martin L. King Day.
• Cash ACGBs are 3bps cheaper with the AU-US 10-year yield differential at -10bps.
• Swap rates are 3bps higher.
• The bills strip has bear-steepened, with pricing flat to -4.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is fully priced for April (103%), with the probability of a February cut at 66% (based on an effective cash rate of 4.34%).
• The local calendar is light this week, with the highlights being the Westpac Leading Index on Wednesday and S&P Global PMIs (P) on Friday.
• This 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. 

• NZD/USD fell 0.39% on Friday to 0.5585, raising doubts about its ability to test/hold above the 20-day EMA near 0.5625. Mixed momentum signals suggest uncertainty with the RSI dropping back below 40, reflecting renewed bearish pressure, while the MACD histogram shows rising green bars, hinting at lingering but weak bullish sentiment.
• It is a public holiday in the US today, focus will be on US President-elect Donald Trump being in as the 47th President of the United States, with all eyes on any executive orders he enacts on day 1, he has mentioned he plans to sign up to 100 on day 1.
• Descending trendline resistance in the NZD/USD has yet to be really tested since the sell-off kicked off in October. A close above 0.5693 (Jan 7 high) is needed to build a short-term base at the 0.5542 (Jan. 13 low)
• Speculative positions on the NZD showed slight improvement, with net positions rising to -52.1K on January 17, 2025, from -54.6K previously, according to CFTC data. While still bearish, the marginal reduction in short positions suggests easing negative sentiment.
• No large nearby strikes Monday, Upcoming notable strikes: 0.5475 (NZD450m Jan. 22), 0.5675 (NZD400m Jan. 23), 0.5635 (NZD349.1m Jan. 21)
• RBNZ dated OIS is pricing in an 88% chance of a 50bps cut in Feb, with 72bps of cumulative cuts priced by April, while the November meeting has a total of 113bps of cuts priced.
• The NZ-US 2yr swap saw a sharp reversal last week, hitting a low of -94.5bps, we last trade at -66bps.
• There is little on the calendar today, with focus turning to Wednesday CPI numbers.