BONDS: NZGBS: Cheaper With US Tsys After An Uneventful NY Session

USD/JPY saw notable volatility through Friday's US NFP print. The pair spiked to highs of 158.87, levels last seen in July 2024, before retracing quickly. We pulled back to lows of 157.23, before finding some support. The pair tracks near 157.75 in early Monday dealings, with yen up 0.26% for Friday's session, the only G10 currency to rise against the USD for the session. 

• Friday's intra-session lows for USD/JPY remained above the 20-day EMA, which comes in at 156.60, a likely watch point in terms of downside support.
• There were multi support points for the yen, with intervention fears elevated with the pair close to 159.00. An earlier sources report from Friday that the BoJ may upgrade its inflation forecast (BBG) at the Jan policy meeting was another potential saw of support.
• The weakness in global equities, weighed by the sharp rise in US yields post the NFP print, was another yen positive on crosses. The SPX fell 1.54%, while the VIX tested above 20%, but closed back near 19.5%.  
• GBP/JPY fell to lows of 192.20/25, while AUD/JPY dipped sub 97.00. Both pairs recovered some ground and remain above Dec lows at this stage.
• Note local onshore markets are closed today. Tomorrow, we have a speech from BoJ Deputy Governor Himino in Kanagawa. This is at 10:30am local time. 

In local morning trade, NZGBs are 6bps cheaper after US tsy yields gapped higher after Friday’s larger-than-expected December non-farm and private payroll gains and a dip in the unemployment rate. The US 2-year yield rose 12bps to 4.38%, while the 10-year rose 7bps to 4.76%, the highest since November 2023.

• The 256k in December leaves a strong recent trend, with 255k in September, an average of 128k for those two months (initially 132k) before surprisingly reaccelerating again. The unemployment rate of 4.086% in December after very small downward revisions in the prior two months, with 4.23% in November (initially 4.246%) and 4.14% in October (initially 4.15%).
• This week, CPI and PPI inflation measures are on Wednesday and Thursday, respectively. The scheduled Fed speaker docket is muted with the Fed Blackout on Friday.
• NZ home-building approvals rose 5.3% m/m in November, while filled jobs rose 0.3% m/m in November, the first increase since March. Filled jobs rise by 5,980 after declining by ~41,000 from March – October.
• Swap rates are 4-5bps higher.
• RBNZ dated OIS pricing is flat to 2bps firmer across meetings. 51bps of easing is priced for February, with a cumulative 129bps by November 2025.

• NZD/USD fell 0.77% to 0.5557 on Friday, as the USD rallied and hit highest level since Nov. 2022 after the December US jobs report exceeded estimates by a wide margin, with 256,000 jobs added and a 4.1% unemployment rate. All G-10 peers fell against the greenback, with the NZD falling to it's lowest levels since Oct 2022.
• New Zealand's Building approvals jumped 5.3% m/m in November, from a 5.2% decline the month prior, while filled jobs rose 0.30% from a revised -0.2% the month prior
• Technical indicators suggest bearish momentum, with the pair at risk of testing the 13-year low of 0.5470 if it breaks below 0.5500. Initial support is 0.5543 (Jan 10 lows), while to the upside a break above 0.5642 (20-day EMA) before any sort of momentum change can occur.
• The NZ-US 2yr swap fell 10bps on Friday, hitting a new low of -95.5bps, before closing at -94bps. We now trade just off the all time lows off -100bps
• RBNZ dated OIS is pricing in 49bps of cuts at the Feb meeting, and a further 25bps of cut in April, while there is 133bps of cumulative cuts priced in by Oct 2025
• No large nearby strikes Monday, with notable upcoming strikes: 0.5875 (NZD606m Jan. 15), 0.5885 (NZD453.7m Jan. 16), 0.6075 (NZD425.8m Jan. 15)
• There is little else on the calendar today and a slow week is to following with just Food prices on Thursday and BusinessNZ Mfg PMI on Friday