STIR: BoJ Dated OIS Has Firmed Over the Past Week On Strong Data

Oil prices have continued to rise during APAC trading today, but are off their intraday highs, driven by a large reported US inventory drawdown and a cold snap in Europe & the US (heating oil is a distillate). Brent is up 0.4% to $77.32/bbl after reaching $77.47, while WTI is up 0.5% to $74.60/bbl following a high of $74.78. The USD index is up 0.1%.

• There are increasing signs that sanctions are reducing consumption of Iranian and Russian crude with Middle Eastern producers increasing prices to Asia in the face of higher demand, reduced Russian exports and China’s eastern ports requested not to allow US-sanctioned vessels to dock. A tightening of sanctions against Iran by the new US administration is also expected. If the trend persists, then the forecasted excess supply in 2025 may narrow dependent on non-OPEC output and whether OPEC begins to normalise its own production.
• Bloomberg reported that there was a US crude stock drawdown of 4.0mn barrels, more than expected, according to people familiar with the API data. Product inventories continued to rise though with gasoline up 7.3mn and distillate +3.2mn. The official EIA data is published later today.
• Later the Fed’s Waller speaks on the economic outlook and the December FOMC minutes are published. US jobless claims, December ADP employment and November consumer credit as well as November German orders & retail sales and December euro area European Commission survey print.

NZGBs closed showing a bear-steepener, with benchmark yields 6-7bps higher. 

• NZ commodity export prices rose 0.2% m/m in December versus +2.9% in November, according to ANZ Bank.
• NZGBs rallied initially with ACGBs on the back of a drop in Australian Trimmed Mean CPI in November, but this proved fleeting. By the close, there was close to no net change in NZGB yields versus pre-data levels despite ACGBs holding 3-5bps richer. The NZ-AU 10-year differential widened by 3bps on the day.
• Cash US tsys are flat in today’s Asia-Pac session after yesterday’s bear-steepener. The NZ-US 10-year yield differential is unchanged on the day.
• Reminder, much of Thursday's US data has been moved to Wednesday (Wholesale Sales, Weekly Jobless Claims) as well as the 30Y Bond auction re-open to avoid conflicts with Thursday's Federal Holiday/day of Mourning for former President Carter.
• Swap rates closed 1-7bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed flat to 2bps firmer. 51bps of easing is priced for February, with a cumulative 125bps by November 2025.
• The local calendar is empty for the rest of the week. The next release of data is Monday, with Building Permits and Filled Jobs on tap. 

Gold prices have tracked mostly sideways in the first part of Wednesday trade. We were last near $2647, little changed versus end Tuesday levels in the US. Tuesday's 0.46% gain was aided by the pull back in equity sentiment, with a firmer USD/yields not enough to offset in term's of aggregate performance. Intra-session highs from Tuesday were around $2664.3. Better US data outcomes did help take off this level in Tuesday trade. We remain above the simple 100-day MA, which has been a support point in recent months. 

• Outside of traditional macro drivers, China's FX reserves data for Dec showed the central bank continued to add to gold reserves in the month. It resumed such purchases in Nov, after no change in the prior 6 months.