BONDS: NZGBS: Sharply Cheaper As Market Plays Catch-Up After Holiday

Markets in North East Asia are negative, with the exception of South Korean stocks. At this stage, China and Hong Kong markets are off the most, around 1.5-1.6% weaker for the aggregate headline CSI 300 and HSI indices. The onshore briefing around the expanded consumer trade in program for appliances and motor vehicles not shifting the sentiment needle positively. 

• Consumer related sub indices for the CSI 300 are weaker, while the property sub index is also softer, down 2.2% at this stage. In HK the tech sub index is down 2.2% as well. Broader tech headlines from Tuesday US trade, as Nvidia pulled back, aren't helping sentiment in this space. In Taiwan, the Taiex is off around 0.80%.
• In contrast, South Korea markets have bucked the softer trends, with the Kospi rebounding from opening weakness, last up over 1.1%. We had disappointment earning results from both Samsung and LG, but dips have been bought. All the bad news is priced in has been cited as a positive for Samsung.
• In Australia, the ASX 200 is up close to 1%. Sentiment has been supported by the Nov CPI print, which showed the trimmed mean moderated further in y/y terms, supporting local bonds and RBA rate cut prospects.
• For SEA markets, trends are mixed, Singapore stocks higher, but a mostly negative bias elsewhere.  

Oil prices have continued to rise during APAC trading today, but are off their intraday highs, driven by a large reported US inventory drawdown and a cold snap in Europe & the US (heating oil is a distillate). Brent is up 0.4% to $77.32/bbl after reaching $77.47, while WTI is up 0.5% to $74.60/bbl following a high of $74.78. The USD index is up 0.1%.

• There are increasing signs that sanctions are reducing consumption of Iranian and Russian crude with Middle Eastern producers increasing prices to Asia in the face of higher demand, reduced Russian exports and China’s eastern ports requested not to allow US-sanctioned vessels to dock. A tightening of sanctions against Iran by the new US administration is also expected. If the trend persists, then the forecasted excess supply in 2025 may narrow dependent on non-OPEC output and whether OPEC begins to normalise its own production.
• Bloomberg reported that there was a US crude stock drawdown of 4.0mn barrels, more than expected, according to people familiar with the API data. Product inventories continued to rise though with gasoline up 7.3mn and distillate +3.2mn. The official EIA data is published later today.
• Later the Fed’s Waller speaks on the economic outlook and the December FOMC minutes are published. US jobless claims, December ADP employment and November consumer credit as well as November German orders & retail sales and December euro area European Commission survey print.

NZGBs closed showing a bear-steepener, with benchmark yields 6-7bps higher. 

• NZ commodity export prices rose 0.2% m/m in December versus +2.9% in November, according to ANZ Bank.
• NZGBs rallied initially with ACGBs on the back of a drop in Australian Trimmed Mean CPI in November, but this proved fleeting. By the close, there was close to no net change in NZGB yields versus pre-data levels despite ACGBs holding 3-5bps richer. The NZ-AU 10-year differential widened by 3bps on the day.
• Cash US tsys are flat in today’s Asia-Pac session after yesterday’s bear-steepener. The NZ-US 10-year yield differential is unchanged on the day.
• Reminder, much of Thursday's US data has been moved to Wednesday (Wholesale Sales, Weekly Jobless Claims) as well as the 30Y Bond auction re-open to avoid conflicts with Thursday's Federal Holiday/day of Mourning for former President Carter.
• Swap rates closed 1-7bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed flat to 2bps firmer. 51bps of easing is priced for February, with a cumulative 125bps by November 2025.
• The local calendar is empty for the rest of the week. The next release of data is Monday, with Building Permits and Filled Jobs on tap.