OIL: Crude Continues Slide As US Talks About Peace In Ukraine

ACGBs (YM +1.0 & XM +1.5) are slightly stronger on a data-light session. 

• Outside of the previously outlined Westpac consumer confidence, there hasn't been much by way of domestic drivers to flag.
• 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 1-2bps richer with the AU-US 10-year yield differential at -15bps.
• Swap rates are 1-2bps lower.
• 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 (102%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
• Tomorrow, the local calendar is empty.
• 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. 

The updated CFTC positioning data for FX markets, shows leveraged investor shifts in favor of the USD in the first week of January. The table below shows the weekly change and outright position for leveraged contracts and asset managers by currency. This is as at January 7th, so last Tuesday. 

• A big shift was against JPY, with near -11k shorts added by leveraged names. Outright shorts stand at -53.2k, but this is short of 2024 extremes, which extended beyond -100k.
• CAD shorts were also added to, with -94.6k outright shorts the most as measured by leveraged investors. This is close to recent cycle lows for leveraged shorts.
• The bias for asset managers was generally in favour of the USD, albeit in smaller magnitudes compared to the leveraged side. The exception was the AUD, where current shorts were cut. CAD shorts were also cut but by a much more modest amount compared to the AUD. 

Table 1: CFTC Positioning - By Currency & Investor Type 

Source: CFTC/Bloomberg/MNI - Market News

• Tsys futures are trading slightly higher today, although ranges are narrow. Long-end contracts are outperforming, however all the gains were made on the opened, and we have since been slowly pairing those gains are the session has progressed. TU is +01⅛ at 102-17¼, while TY is trading +06 at 107-13+
• The trend in Treasury futures is unchanged and remains bearish. Yesterday’s bearish start to the week, has once again, confirmed a resumption of the downtrend. Sights are on 107-04 next, a Fibonacci projection. Note too that moving average studies remain in a bear-mode position highlighting a dominant downtrend. Key short-term resistance is seen at 108-26, the 20-day EMA.
• Cash tsys yields are slightly lower today, although still remain near Friday's highs. The 2yr is -0.2bps at 4.377%, while the 10yr is -1.2bps at 4.766%. The 2s10s is 1bp lower at 38.408.
• Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks.
• Projected rate cuts through mid-2025 continued to retreat on Monday, we have given back about 1bp of that move through to June, however firmed 2bps for July vs. late Friday levels ()*: Jan'25 steady at -0.7bp, Mar'25 -5.4bp (-6.3bp), May'25 -9.5bp (-10.5bp), Jun'25 -17.3bp (-18.2bp), Jul'25 -20.2bp (20.2bp).
• Later today we have PPI & Federal Budget Balance, focus will then turn to Wednesday’s US CPI.