ASIA STOCKS: Equity Flows Muted On Tuesday, India Continues To See Selling

RBA-dated OIS pricing is 2–15bps firmer across meetings today, led by late 2025 and early 2026 contracts. Current pricing is now flat to 9bps firmer compared to pre-CPI levels from last Wednesday. 

• For context, OIS pricing had softened by as much as 5bps below pre-CPI levels for certain meetings following the data release.
• A 25bp rate cut is still more than fully priced for April (109%), with a 69% probability of a February cut (based on an effective cash rate of 4.34%).
• Prior to last week’s CPI data, the likelihood of a 25bp cut in April had eased to 108% (27bps), while the February cut probability was at 65%. 

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

Source: MNI – Market News / Bloomberg

USD/CNH got close to 7.3650 in US Friday trade, post the stronger than expected NFP and dip in the unemployment rate. Pullbacks towards 7.3500 were supported post the data and we track near 7.3600 in early Monday dealings. CNH lost 0.10% for Friday's session, still outperforming broader USD index gains (BBDXY +0.47%, DXY +0.43%). Spot USD/CNY finished very close to the top end of the daily trading band at 7.3326. The CNY CFEST basket tracker was relatively steady at 101.39. 

• For USD/CNH spot, upside interest will rest on end 2024 highs at 7.3695. Can we break through this level without a move higher in USD/CNY spot, which remains wedged just above 7.3300, anchored by the steady onshore CNY fixing near 7.1900, will be in focus today.
• Given the further rise in USD indices from Friday, the bias will remain for a firmer fixing outcome, with the fixing error to stay or make fresh wides unless the authorities accept fresh onshore depreciation pressures.
• In the cross asset space, local government bond yields held firmer on Friday, more so at the front end, as the PBoC halted bond purchases, with current market conditions being dominated from the demand side. Local equities were softer though, the CSI 300 off 1.25% to the low 3730 region. US tech curbs, growth concerns and softer global trends, are all weighing in this space.
• Locally today we have Dec trade figures. Export growth is projected at 7.5%y/y, versus 6.7% prior, with some potential front loading of exports ahead of the returning trump administration in focus. Imports are forecast at -1.0%y/y versus prior -3.9%. We also still await Dec new loans/aggregate finance data. 

• Treasuries ended Friday with steep bear-flattening move as Fed-dated OIS contracts repriced to levels anticipating just one 25bp cut this year. While the selloff was sparked by strong December employment, the 2 to 7yr yields all rising over 10bps, with the 3yr the worst performing closing the session 13bps higher. Tsys futures were hit hard with TU closing -08⅝ at 102-16⅜, while TY closed -0-26+ at 107-12+ well through support and has confirmed a resumption of the downtrend.
• There will be no cash trading in Asia today, with Japan out for a Public holiday. On Friday, cash yields closed 1-13bps higher. the 2yr closed +11.6bps at 4.379%, while the 10yr closed at +7bps at 4.675% now the highest level since Nov 2022. The 2s10s closed back below 40bps, falling 4.7bps at 37.582, while the 5s30s & 2s30s both fell about 10bps.
• The 256k in December leaves a strong recent trend, with 255k in Sep, an average of 128k for those two months (initially 132k) before surprisingly reaccelerating again. Unemployment rate: 4.086% in Dec after very small downward revisions in the prior two months, with 4.23% in Nov (initially 4.246%) and 4.14% in Oct (initially 4.15%).
• Several big banks shifted their Fed forecasts to fewer or later-starting cuts, with Bank of America saying they no longer expect any.
• Projected rate cuts through mid-2025 have retreated since this morning's data, current vs. morning levels* as follows: Jan'25 at -0.7bp (-1.7bp), Mar'25 -6.3bp (-10.1bp), May'25 -10.5bp (-15.9bp), Jun'25 -18.2bp (-25.6bp), Jul'25 -20.2bp (25.5bp).
• The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.