LNG: Gas Remains In High Demand, European Prices Rebound

ACGBs (YM -3.0 & XM -2.5) are slightly cheaper after US tsys finished on Friday with a modest bear-flattener, well off early session bests. The US 2-year yield finished 5bps higher at 4.29%, while the 10-year nudged 2bps higher to 4.63%. 

• Industrial production surprisingly jumped 0.9% M/M (cons 0.3) in December, while building permits were a little higher than expected.
• The cash US tsy market and stock exchanges are closed today for Martin L. King Day.
• Cash ACGBs are 3bps cheaper with the AU-US 10-year yield differential at -10bps.
• Swap rates are 3bps higher.
• The bills strip has bear-steepened, with pricing flat to -4.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is fully priced for April (103%), with the probability of a February cut at 66% (based on an effective cash rate of 4.34%).
• The local calendar is light this week, with the highlights being the Westpac Leading Index on Wednesday and S&P Global PMIs (P) on Friday.
• This week, the AOFM plans to sell A$300mn of the 4.25% 21 June 2034 bond on Monday, A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 1.50% 21 June 2031 bond on Friday. 

• NZD/USD fell 0.39% on Friday to 0.5585, raising doubts about its ability to test/hold above the 20-day EMA near 0.5625. Mixed momentum signals suggest uncertainty with the RSI dropping back below 40, reflecting renewed bearish pressure, while the MACD histogram shows rising green bars, hinting at lingering but weak bullish sentiment.
• It is a public holiday in the US today, focus will be on US President-elect Donald Trump being in as the 47th President of the United States, with all eyes on any executive orders he enacts on day 1, he has mentioned he plans to sign up to 100 on day 1.
• Descending trendline resistance in the NZD/USD has yet to be really tested since the sell-off kicked off in October. A close above 0.5693 (Jan 7 high) is needed to build a short-term base at the 0.5542 (Jan. 13 low)
• Speculative positions on the NZD showed slight improvement, with net positions rising to -52.1K on January 17, 2025, from -54.6K previously, according to CFTC data. While still bearish, the marginal reduction in short positions suggests easing negative sentiment.
• No large nearby strikes Monday, Upcoming notable strikes: 0.5475 (NZD450m Jan. 22), 0.5675 (NZD400m Jan. 23), 0.5635 (NZD349.1m Jan. 21)
• RBNZ dated OIS is pricing in an 88% chance of a 50bps cut in Feb, with 72bps of cumulative cuts priced by April, while the November meeting has a total of 113bps of cuts priced.
• The NZ-US 2yr swap saw a sharp reversal last week, hitting a low of -94.5bps, we last trade at -66bps.
• There is little on the calendar today, with focus turning to Wednesday CPI numbers.

• It is likely that ahead of the Chinese New Year period coupled with pressure on CNY there will be little movement in today’s Prime Rates.
• The Prime Rate is the preferential lending rate offered by commercial banks to the prime customers and is calculated based on 18 commercial banks averaging the rates provided by commercial banks.
• Whilst the PBOC have now moved to a ‘loose’ monetary stance for the first time in more than a decade, market expectations are for moderate changes to policy.
• With economic data showing signs of recovery (last week’s GDP ahead of expectations, retail sales on improving trend) it would seem likely that policy maintains the status quo for now, rather than cutting at a time when policy uncertainty exists for the Federal Reserve’s path for interest rates.