STIR: BoJ-Dated OIS Pricing Remains Firmer Than Late-January

ACGBs (YM -5.0 & XM -4.5) are weaker and near Sydney session lows.

• Australia’s Dec. Leading Index fell 0.02% m/m to 97.17.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-flattener.
• Cash ACGBs are 4-5bps cheaper with the AU-US 10-year yield differential at -14bps.
• Swap rates are 4bps higher, with EFPs slightly tighter.
• The bills strip has bear-steepened, with pricing -1 to -5.
• The Australian economy will expand 0.4% in Q4 24 and +0.5% in Q1 25, according to the latest results of a Bloomberg News survey conducted from Jan. 16 to Jan. 21. 48 economists joined this survey and forecast the cash rate to be unchanged at 4.35% at the end of Q1 25 and 4.10% by the end of Q2 25.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (109%), with the probability of a February cut at 69% (based on an effective cash rate of 4.34%). 

AUDUSD has been trading in a narrow range today falling to 0.6255 and then rising to 0.6277 driven by movements in the greenback as there has been little new information so far (USD index is slightly higher). It is currently down 0.15% to 0.6265 continuing its downtrend. 

• The 6-month annualised rate of the December Westpac lead index was slightly slower at 0.25% after 0.33%. This measure leads growth relative to trend by 3 to 9 months and it was positive throughout Q4 signalling some improvement in growth over H1 2025.
• AUDNZD is 0.2% higher at 1.1076 after Q4 NZ CPI printed broadly in line with expectations but showed a greater slowing in non-tradeables inflation. The data strengthened the view that the RBNZ will cut rates again by 50bp at its February 19 meeting.
• Aussie is relatively flat against other major currencies with AUDJPY around 97.55, AUDEUR 0.6018 and AUDGBP 0.5078.
• Equities are mixed with the ASX up 0.4% and S&P e-mini +0.2% but Hang Seng down 0.6% and CSI 300 -0.3%. Oil prices are range trading with WTI around $75.76/bbl. Copper is 0.4% lower and iron ore around $104/t.
• Later US December leading index prints and ECB President Lagarde and Bundesbank’s Nagel speak. 

China could offer interest or yield subsidies to speed up local authorities' acquisition of unsold homes for affordable housing and destocking, 21st Century Business Herald reported, citing Zhu Haibin, chief China economist at J.P. Morgan Chase. The Ministry of Finance could support CNY1 trillion of housing acquisitions by releasing CNY20 billion of funds through subsidising interest rates or yields by about two percentage points, said Zhu. A yield of 3.5-4% would make acquisitions attractive, compared to China’s current rental yield of about 2%, Zhu added.