AUSSIE 10-YEAR TECHS: (H5) Bounces Off Pullback Lows

• Nvidia shares plunged 17%, erasing $589b in market value, the largest single-day loss in U.S. stock market history, amid concerns over Chinese AI startup DeepSeek's low-cost, competitive AI model. The selloff, which rippled through broader markets, was driven by fears that DeepSeek's efficiency-focused technology could disrupt the AI industry's reliance on expensive, high-end chips, a market dominated by Nvidia. DeepSeek's rise, despite U.S. export bans on advanced semiconductors, highlights China's growing innovation in AI.
• Broader markets followed suit, with the S&P 500 shedding 1.5% and the Nasdaq 100 dropping about 3%. Energy and utilities stocks tied to AI trends were also hit hard, with Vistra Corp., GE Vernova, and Constellation Energy suffering record declines of 28%, 22%, and 21%, respectively.
• In contrast, Apple rose 3.3%, reclaiming its position as the largest company by market value, while Meta gained 1.9%. Smaller tech companies showed mixed results: Aurora Mobile surged 142% after announcing DeepSeek integration, while MicroCloud Hologram gained 8.4%. 

• Tsys futures closed higher on Monday, following a strong haven bid as equities in particular tech stocks were hit hard with the NASDAQ down 3%, and NVIDIA falling 17%. Yields across many maturities closed at YTD lows, while the 2 & 5yr auctions were well received. TU closed +0-04⅞ at 102-29, while TY closed +0-22 at 109-05, with futures volumes more than 40% above the 20-day averages
• Cash tsys curves closed mixed, the belly has outperformed with the 7yr closing -9.3bps at 4.443%, while the 10yr is -8.7bps at 4.534%. The 2s10s closed -2bps at 33bps, while the 5s10s closed +0.5bps at 19.50bps.
• December's pickup in new home sales was larger than expected, reaching 698k (675k expected) on an seasonally-adjusted annualized rate basis, up from 674k in November (revised up from 664k).
• Fed-dated OIS contracts priced in a more dovish Fed, anticipating 50bp of easing by the end of this year vs 40bp at Friday’s close.
• Projected rate cuts through mid-2025 regain traction vs. late Friday (*) levels as follows: Jan'25 at -0.7bp (-0.1bp), Mar'25 at -8.3bp (-6.9bp), May'25 at -15.9bp (-13.6bp), Jun'25 at -27.9bp (-24.7bp), Jul'25 at -33.7bp (-28.6bp).
• Focus remains on Wednesday's FOMC policy annc, no move expected, as well as a heavy slate of corporate earnings later today: PACCAR, Sysco Corp, Synchrony Financial, Lockheed Martin Corp, Veradigm, Royal Caribbean, Polaris Inc., Boeing, NextEra Energy, JetBlue Airways, General Motors, Kimberly-Clark Corp, Invesco, Starbucks, Qorvo and Stryker Corp.

ACGBs (YM +8.0 & XM +7.5) are sharply stronger as trading resumes after the Australia Day long weekend. 

• Yesterday, US tsys finished 7-9bps richer after holding gains seen in yesterday’s Asia session as Chinese AI startup DeepSeek shook the broader market.
• The focus remains on Wednesday's FOMC policy announcement, no move is expected.
• Cash ACGBs are 8bps richer with the AU-US 10-year yield differential at -14bps.
• Swap rates are 6-7bps lower.
• The bills strip has bull-flattened, with pricing +3 to +7.
• Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
• RBA-dated OIS pricing is 1-6bps softer across meetings today. A 25bp rate cut is more than fully priced for April (123%), with the probability of a February cut at 77% (based on an effective cash rate of 4.34%).
• Today, the local calendar will see NAB Business Confidence.
• The AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond today.  The AOFM also plans to sell A$800mn of the 2.50% 21 May 2030 bond on Friday.