AUSSIE BONDS: Bull-Steepener As Risk Off Remains, HH Spend In Line

• The resilience of the service sector is evident in today’s release as the impact of the Lunar New Year holiday begins to fade.
• February’s release for the Caixin PMI Services was +51.4 was up from January’s +51
• The release has maintained strong momentum since late 2022, reflecting that despite the challenges for the domestic economy stemming from the property sector, domestic demand remains stable. 

Asian stocks rebounded after US Commerce Secretary Howard Lutnick suggested the Trump administration may ease tariffs, which had triggered a global market selloff. Hong Kong led gains as China reaffirmed its 5% GDP growth target at the National People’s Congress, boosting sentiment. Japan’s equities fluctuated as investors awaited further details on Trump’s trade policies. South Korea announced a major ₩50t fund to support high-tech industries, providing some relief after recent equity outflows. Meanwhile, New Zealand’s market declined following RBNZ Governor Adrian Orr’s resignation, and Australia’s ASX 200 dropped 1% despite Q4 GDP meeting expectations.

• Hong Kong’s Hang Seng Index surged 2.30% as China emphasized domestic demand as the primary economic driver for 2025 and committed to supporting AI and other growth sectors. China also set its GDP growth target at ~5% and increased its budget deficit to the highest level in 30 years to counter economic headwinds. The CSI 300 is 0.10% higher.
• Japan’s Topix & Nikkei are both trading flat as investors reacted cautiously to Trump’s potential tariff revisions. Carmakers rebounded after Tuesday’s losses, but financial stocks lagged. BOJ Deputy Governor Shinichi Uchida’s upcoming comments on monetary policy and yen movement remain in focus.
• South Korea detailed a ₩50t ($37b) special fund to boost high-tech industries like semiconductors, batteries, and AI. The government-backed fund will provide low-interest loans and equity investment, requiring parliamentary approval in March. The move comes amid sustained foreign investor outflows. The KOSPI is 0.50% higher, Samsung is a drag the Index, trading 0.30% lower.
• Australia's ASX 200 is 1.20% lower as Q4 GDP grew 0.6%, in line with expectations, reinforcing the RBA’s cautious stance on rate cuts. Weak risk sentiment and global trade concerns weighed on the market. The NZX 50 index fell 0.9% erasing early gains following RBNZ Governor Adrian Orr’s surprise resignation. Investors are now watching for signals on future monetary policy direction.

RBA-dated OIS pricing is 1-6bps firmer across meetings today. 

• Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through May are 2-4bps firmer, while those beyond are flat to 10bps softer.
• Today, Q4 GDP printed exactly in line with consensus at +0.6% q/q & 1.3% y/y up from 0.3% & 0.8% in Q3, but above the RBA’s February forecast of 1.1% y/y.
• A 25bp rate cut in April is given a 10% probability, with a cumulative 58 bps of easing priced by year-end (based on an effective cash rate of 4.09%). 

Figure 1: RBA-Dated OIS – Today Vs. Pre-RBA Levels

Source: MNI – Market News / Bloomberg