AUSSIE BONDS: Cheaper With US Tsys Ahead Of US Payrolls

CNH rose a touch for Tuesday's session, outperforming the broader USD rebound. USD/CNH tracks close to 7.3400 in early Wednesday trade, with dips towards 7.3300 supported on Tuesday. Spot USD/CNY was little changed at 7.3280, just under the upper daily trading limit. Still, the CNY CFETS basket tracker fell 0.45% to 101.43 on Tuesday, continuing to correct off recent highs. 

• To the extent the USD/CNY fixing remains steady near 7.1900, it will continue to limit onshore spot upside above 7.3300. In turn the CNH-CNY basis, which has spent little time beyond 400pips in the past year, may be a headwind for USD/CNH if we rebound into the 7.3600/7.3700 region.
• Another focus point for markets is reduced liquidity in the offshore market, with implied yields surging. The 1 week for CNH is above 5%, while 1 month is above 4%. The overnight CNH Hibor got to 8.1%, the highest since June 2021.
• Recall on Monday headlines crossed around more planned bill sales in Hing Kong in January from the PBoC.
• Still, as we approach Trump's inauguration on Jan 20, dips in USD/CNH are likely to be supported. The 20-day EMA support zone has held since early Nov. This level rests at 7.3134 currently.
• The local data calendar is empty until tomorrows inflation print. Late yesterday Dec FX reserves printed, falling to $3.2trln, which was below expectations ($3.25trln) but we remain above 2023 lows for reserves. 

In local morning trade, NZGBs are 4-6bps cheaper after a data-induced heavy session for US tsys.

• US tsys drifted sideways for most of the session after establishing cheaps after the morning's data: The JOLTS report saw surprisingly elevated job openings in November, but the quits rate reversed a surprise increase from October. Job openings were 8090k (cons 7740k) in November after an upward revised 7,839k (initial 7,744k) in October.
• Headline ISM strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months.
• The local calendar today will see the Dec ANZ commodity price series. The Nov rise was 2.9% m/m. Also note Australian monthly CPI is out.
• NZ house prices may show a modest recovery this year after failing to respond to falling interest rates in the final months of 2024, according to CoreLogic. (per BBG)
• Swap rates are 4-6bps higher.
• RBNZ dated OIS pricing is little changed. 51bps of easing is priced for February, with a cumulative 126bps by November 2025.

Oil prices rose around a percent on Tuesday on increased demand for heating fuel from cold weather in the US and Europe, and possible tightening of the oil market from frozen US crude facilities. Also China’s eastern ports receiving imports from Iran were asked not to allow US-sanctioned vessels to dock. The USD index rose 0.1%.

• WTI rose 1.2% to $74.45/bbl to be 3.8% higher this month. It fell to $73.11 and then trended up to a high of $74.53, close to resistance at $74.99. The bull trigger is at $76.41. The relative strength index continues to flash overbought though and initial support is at $71.79.
• Brent has broken above $77 after rising 1.0% to $77.04/bbl. After a low of $75.91 it rallied to reach $77.28, approaching resistance at $77.50, January 6 high. Key resistance is at $79.50. Initial support is at $74.72, January 2 low.
• Saudi, Oman and Dubai have all increased prices of shipments to Asia as the region shifts away from Iranian and Russian crude to comply with US sanctions especially on shadow shipping. Bloomberg observed that data showed Russian output in December was lower than its OPEC quota.
• 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. They fell 3.1mn barrels at Cushing last week. Product inventories continued to rise though with gasoline up 7.3mn and distillate +3.2mn. The official EIA data is published later today.