JGBS: Cheaper, Fresh Cycle High For 10YY, PPI Data In-Line

ACGBs (YM +1.0 & XM +0.5) are slightly stronger on a data-light session. 

• Westpac consumer confidence edged down 0.7% in January to 92.1 points on concerns about the broader economy, including a weaker currency and uncertainty about the timing of interest-rate cuts.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off. US PPI data will be released later today, ahead of CPI data tomorrow.
• Cash ACGBs are 1bp richer with the AU-US 10-year yield differential at -14bps.
• Swap rates are flat.
• The bills strip is little changed.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (103%), with the probability of a February cut at 67% (based on an effective cash rate of 4.34%).
• AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold tomorrow and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday. 

In Tokyo morning trade, JGB futures are weaker, -49 compared to settlement levels, as trading resumes following yesterday’s holiday.

• According to MNI’s technicals team, a clear downtrend in JGB futures remains intact and the latest fresh cycle lows, reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively.
• Bank Lending Incl. Trusts rose 3.1% y/y in December, while the Adj. Current-Account Surplus printed 3.03trn yen vs. est. +2.58trn yen. Trade Surplus 97.9bn yen vs. est. -34.6bn yen.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off. US PPI data will be released later today, ahead of CPI data tomorrow.
• Cash JGBs are 3-5bps cheaper across benchmarks. The benchmark 5-year yield is 0.39bps higher at 0.868% ahead of today’s supply.
• Swap rates are 1-3bps higher, with a steepening bias. Swap spreads are mixed.

Early USD losses have been pared. The BBDXY index was last near 1317, after opening near 1314 on potential gradual tariff headlines (just above pre NFP levels from Friday). We are still around 0.20% weaker versus end NY levels on Monday. Uncertainty around what will actually be delivered, coupled with getting close to pre NFP levels from last week, may have induced some USD dip buying.  

• Higher beta plays are still outperforming, albeit on a relative basis. NZD/USD remains up 0.30%, but is back sub 0.5600. AUD/USD is back near 0.6185, only 0.10% higher for the session.
• USD/JPY has rebounded back above 157.50, earlier lows were at 157.12. We are little changed for the session. EUR and GBP are back close to flat as well. GBP/USD remains above 1.2200.  USD/CNH has pared losses, back above 7.3400, while USD/MXN is around flat, last close ton 20.65.
• In the cross asset space, US equity futures hold higher, but away from best levels fort he session. Eminis were last +0.25%. US yields opened lower, but are edging higher in latest trade, the 10yr Tsy yield back close to flat above 4.77%.
• We've had Australia and Japan data, but sentiment hasn't been shifted. The Westpac Australian consumer sentiment index fell to 92.1,a 0.7% decline. IN Japan the trade and current account surpluses were better than projected. 
• Coming up, the main focus will be on the BoJ Deputy Governor's speech, due in around 40mins.