ZAR: Rand Wipes Out Weekly Loss, SARB Governor Touts Progress On Target Review
Spot USD/ZAR deals at 18.3895, more than 1,000 pips below neutral levels, with the key near-term layer of support defined at 18.3022, which represents the low print of Jan 24. Bulls need a rally above Jan 13 high of 19.2296 to regain the upper hand.
- SARB Governor Kganyago said that the central bank's research shows clear benefits from having a lower inflation target and said that the SARB is championing this idea.
- Most investors and analysts recently polled by Bloomberg said that South Africa should not rush the process. The median estimate was for the gradual lowering of the inflation target to +3.0% Y/Y next year.
- SAGB yields have eased across the curve, with South Africa's 5-year and 10-year breakeven inflation rates last seen at 4.46% and 5.54% respectively.
- The composite BBG Commodity Index is up by 0.8%, with the precious metals subindex 1.3% better off. Gold trades ~$8.8/oz. higher on the session.
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EGBS: /SWAPS: Commerzbank Remain Short Long End German & French ASWs
Commerzbank note that “repo specialness continues to erode out of year-end, but exclusively due to the rich, seasoned Bunds. Recent issues and GC remain floored around depo, suggesting that the collateral floor continues to hold.”
- “Swap spreads stay tense as the renewed pressure on (ultra-)longs offsets the collateral-driven resilience in Schatz-spreads. As fiscal fears continue to dominate, U.S. Tsy and Gilt spread-structures signal further downside even if the collateral floor remains in place. We therefore stay short (ultra-)long Bund ASW spreads outright and vs. the curve, as well as 30y OAT spreads.”
- “As the specialness differential between seasoned, low-free-float Bunds and high-free-float ones continues to compress we see value in switching out of seasoned, rich DBRs into the active peers. EGB-spreads should continue to consolidate as fiscal fears stays in focus.”
EUROPEAN INFLATION: French CPI Inflation Momentum Rebounded In December
French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at 1.32% Y/Y.
- Core CPI softened to 1.3% Y/Y (from 1.5% in November).
- Services was revised down 1 tenth from flash to 2.2% Y/Y (2.3% in Nov) while core services also softened to 2.6% (vs 2.8% in Nov - there is no flash for this series). The slowdown in services was in part due to prices of communication services falling 14.7% (vs -12.2% prior).
- The broad "manufactured products" component was unrevised from the flash print at -0.4% Y/Y (vs -0.3% prior). Core manufactured products fell at a steeper rate 0.4% Y/Y (from -0.2% in Nov).
- The softening in services and manufactured products is offset by energy rebounding between November and December; it was unrevised from flash at 1.2% Y/Y (vs -0.7% in Nov).
- INSEE's seasonally adjusted CPI series highlights momentum rebounding after having eased for the previous few months. CPI rose 0.4% M/M seasonally adjusted (SA), after a flat reading in November. The 3m/3m SA annualised rate rose 0.18% in December (vs a fall of 0.71 in Nov), and the 3m annualised rate rose a solid 2.63% (from -1.45% in November) - the firmest since August 2024.
- There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in December (34% vs 35% prior), with the proportion of components with annual inflation rates above 6% also falling marginally to 10% from 11% in November.
EQUITIES: Big names are reporting Today
US Earnings kicks off today, big names are reporting all pre Markets, notable ones:
- Pre Markets: Blackrock, BoNY, Citi, GS, JPM, Wells.
