US TSYS: Cheaper, Risk-On As US Govt Shutdown Risk Reduced

RBA-dated OIS pricing is 1–5bps firmer across meetings today, led by late 2025 contracts. 

• More notably, OIS pricing is now mixed compared to pre-Q4 CPI levels on 24 January, with the Aug-25 meeting firming by 10bps over the past week.
• A 25bp rate cut in April remains fully priced (119%), while the probability of a February cut stands at 84% (based on an effective cash rate of 4.34%).
• Historically, it would be highly unusual for the RBA to diverge from market expectations, especially given its lack of official or unofficial efforts to push back against pricing—something it has actively done in the past.

Figure 1: RBA-Dated OIS – Today Vs. Pre-Q4 CPI

Source: MNI – Market News / Bloomberg

• Japanese equities returned from a holiday with a mixed session. The Nikkei gained 0.4% supported by a weaker yen aiding exporters, while the Topix is down 0.10%. Toyota declined 1.8%, dragging on broader sentiment. Investors are shifting from AI-heavy semiconductor stocks toward electronic components and machinery.
• China/Hong Kong are higher today with the HSI up 1.65% as Alibaba surged 5.8% on reports of an Apple partnership for AI in China, the HS Tech Index is +2%. Optimism around DeepSeek’s AI innovation also bolstered sentiment, with UBS strategists saying the rally may be “less than halfway” done. However, MSCI cut 20 Chinese stocks from its indices, extending a trend of lower global exposure, this seems to have weighed on mainland equities with the CSI 300 up just 0.15%.
• South Korean equities are trading 0.20% higher today however both major tech stocks (Samsung, -0.50% & SK Hynix, -0.20%) struggle. Taiwan's TAIEX is 0.40% higher.
• Australian equities opened lower, however have since erased losses as CBA reported first-half earnings in line with analyst estimates, but warned of economic headwinds as growth slows. Despite initial weakness, shares rebounded as much as 1.4% to a record high. The ASX 200 is trading 0.30% higher, New Zealand equities are unchanged.
• Indian equities have struggled recently with the Nifty 50 down about 3% over hte past week as continued selling from foreign investors hurts sentiment. The rupee rallied sharply, its biggest gain in two years, on suspected central bank intervention, reversing recent record lows.

NZD/JPY is tracking around 0.85% higher, as the cross approaches the 87.00 level. This would put us within striking distance of the 20-day EMA, although as the chart below shows, this hasn't been an important inflection point recently. The 50-day, which sits higher closer to 88.00, has been breached on several occasions in Jan this year, but ultimately that proved to be a selling opportunity in this cross. 

• Yen weakness remains the main driver of yen crosses (USD/JPY last close to 153.45/50), but NZD/USD has picked up a little ground, last near 0.5665/70, up a little over 0.20%.
• The better tone to HK/China equities, has aided AUD and NZD in recent dealings, although HK markets are clearly outperforming at this stage.
• For AUD/JPY we are close to 96.75, which is already above the 20-day EMA, the 50-day day is near 97.31.  

Fig 1: NZD/JPY Versus Key EMAs 

Source: MNI - Market News/Bloomberg