INDIA:  PMIs Strong, Pointing to Improving Outlook. 

• Asian equities are trading mixed today as investors weighed optimism around U.S. infrastructure and AI investment initiatives under President Trump against renewed tariff concerns on Chinese goods. Japan's Nikkei 225 and Taiwan's Taiex led gains, up 1.5% and 1.3%, respectively, boosted by tech stocks like SoftBank (+8.9%) and TSMC (+2.7%) following Trump's AI investment announcements. South Korea's Kospi added 1.2%, with nuclear energy and construction stocks rallying on expectations of increased U.S. infrastructure spending.
• In contrast, Chinese shares underperformed, with the CSI 300 down as much as 1.3% amid concerns over potential 10% tariffs on Chinese imports. Hong Kong's Hang Seng also dropped 1.3%, reflecting weaker sentiment in the region.
• Australia's ASX 200 is 0.35% higher, while In New Zealand, the NZX 50 was flat after inflation data showed annual CPI steady at 2.2%, while Pacific Edge fell 5% following U.S. legal challenges.
• The broad MSCI Asia Pacific Index edged up 0.2%, reflecting the uneven performance across the region.

JGB futures are weaker and at session lows, -18 compared to settlement levels.

• The BoJ will announce its latest monetary policy decision this Friday, with expectations that it will move further along its policy normalization path. Both market consensus and our analysis suggest a 25bps rate hike as the most likely outcome.
• The BoJ raised rates twice in 2024, first in March and again in July. However, it has maintained a hold since then, largely due to market volatility, including significant yen swings after the July hike. Political uncertainty has also played a role, as the ruling coalition lost its majority in lower house elections late last year.
• Market expectations currently indicate: a 93% probability of a 25bp hike in January; a cumulative 96% chance by March; and a full 25bp increase priced by May 2025.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-flattener.
• Cash JGBs have twist-flattened, pivoting at the 30-year, with yields 2bps higher to 2bps lower. The benchmark 10-year yield is 0.9bp higher at 1.203% versus the cycle high of 1.262%.
• Swap rates are ~2bps higher. 
• Tomorrow, the local calendar will see Trade Balance, International Investment Flow and Tokyo Condominiums for Sale data alongside an Enhanced Liquidity Auction covering 1-5-year OTR JGBs.

• Tsys futures are trading lower today and holding just off session lows. TU is -00⅛ at 102-23⅛, while TY is -03 at 108-20+.
• The medium-term trend remains bearish and the recovery that started Jan 13, is considered corrective. The contract has traded through the 20-day EMA, at 108-17. This exposes 109-06, the Dec 31 high, and 109-17+, the 50-day EMA. The bear trigger has been defined at 107-06, the Jan 13 low.
• There was a small block buying of FY earlier, however volumes are low and there hasn't been much else in terms of notable flows today.
• Cash tsys yields are trading 1-2bps higher in Asia, the belly is under-performing slightly, giving back some of Tuesday out performance. The 10yr is +1.2bps at 4.589%. The 2s10s curve is holding steady at 30bps, while the 5s30s is -1bps at 40.306.
• Headlines from Trump have been trickling out throughout the session, however there has been nothing we hadn't already expected. There were comments about 10% tariffs on goods imported from China on Feb. 1 because fentanyl is being sent from China to Mexico and Canada. There has also been comments about sanctions on Russia if they don't negotiate with Ukraine.
• The 2025 Fed rate cut expectations fairly static. Projected rate cuts through mid-2025 this morning, current lvls vs. Friday close* as follows: Jan'25 steady at -0.01bp, Mar'25 at -6.6bp (-7.5bp), May'25 -12.4bp (-12.9bp), Jun'25 -22.3bp (-21.8bp), Jul'25 at -26.1bp (-25.6bp).
• The data calendar remains light with MBA mortgage data and the December Leading Index - more focus will be on $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.