JGBS: Futures Higher But Off Highs, Rengo Wage Outcome Due

ACGBs (YM -6.0 & XM -8.0) are cheaper and near the Sydney session’s worst levels.

• “The Australian economy is slowly improving and millions of mortgage holders will finally feel their disposable incomes rise when the Reserve Bank cuts interest rates next week, as widely expected, the country’s largest bank said as it posted a bumper $5.13 billion half-year profit.” (per SMH via BBG)
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s modest sell-off. The focus is on key US CPI inflation data today at 0830ET.
• Cash ACGBs are 6-8bps cheaper with the AU-US 10-year yield differential at -9bps.
• Swap rates are 5-8bps higher, with the 3s10s curve steeper.
• The bills strip is -2 to -6 across contracts.
• Tomorrow, the local calendar will see Consumer Inflation Expectations. This is the last data release before the RBA policy Decision next Tuesday.
• RBA-dated OIS pricing is 1–6bps 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%).

• In a relatively quiet day in the China bond market, the major futures contract ground higher throughout the day.
• China’s 10YR Future is up +0.3 to 109.285, marking the third successive day of gains.
• The 10YR Future remains above the 20-day EMA of 109.17 with the recent days of gains pulling it further away.
• China’s 2YR Future is up +0.03 to 102.658, recovering from yesterday's modest declines.
• China’s 2YR Future’s recovery has seen it bounce on the 100-day EMA of 102.62, having failing to breach it.
• There is no Tier 1 data out from China this week, with market’s reacting to ongoing tariff headlines.
• The data that is out is FDI for January, New Yuan Loans and Aggregate Financing for January. 

Oil prices are moderately lower today following data showing another large US inventory build. They rose over Monday and Tuesday on supply concerns. WTI is down 0.4% to $73.05/bbl after a low of $72.93 and Brent is 0.3% lower at $76.74/bbl. The USD index is 0.1% higher, which is also likely weighing on dollar-denominated crude.

• Bloomberg reported that there was a US oil stock build of another 9mn barrels last week, according to people familiar with the API data. Flows from Canada have been ramped up in recent weeks to beat tariffs. Product inventories were lower with gasoline down 2.5mn and distillate 600k. The official EIA data is out later today.
• Despite tighter US sanctions on Russia appearing to impact its output and stricter enforcement of those against Iran have been announced, the US’ EIA increased its expectations of excess supply in 2025 and 2026. The market has been concerned about the impact of protectionism on global demand. OPEC’s monthly report is published today and the IEA’s on Thursday, which tends to be less optimistic regarding the outlook than OPEC.
• Later Fed Chair Powell testifies to the House financial services committee and the Fed’s Bostic and Waller also speak. January US CPI prints and Bloomberg consensus is expecting no change in the headline at 2.9% but for core to ease 0.1pp to 3.1% (see MNI US CPI Preview). January budget and real earnings data are also out. The ECB’s Elderson speaks at an MNI Connect event and BoE’s Greene appears.