JGBS: RBNZ Dated OIS Pricing Firmer Than Pre-Labour Mkt Data Levels

Oil benchmarks sit a touch off recent highs, although more so for Brent than WTI. Brent was last around $80.75/bbl, off around 0.30% for the session so far. WTI was close to $78.70/bbl. Both benchmarks remain within striking distance of recent highs, which came post fresh US sanctions on Russia at the end of last week. Elsewhere, gold continues to trade with a positive bias, up nearly 0.30%. Metals are mostly positive as well, with copper and iron ore up. 

• For WTI, upside focus is on $79.59, the Jul 5 ‘24 high, followed by $80.14, the Apr 12 ’24 high and a key medium-term resistance. Tanker rates have reportedly risen in response to US actions, while other measures of supply, like prompt spreads are also giving bullish signals for oil.
• Gold maintains its support on dips backdrop, last near $2670, up modestly in Tuesday trade to date. Recent resistance around $2700 remains intact. The softer USD backdrop is lending support to hold today, although better equity trends is likely aiding risk appetite (which can be a gold headwind).
• Copper has been aided by USD softness and the earlier reports of a gradual ramp up in tariffs by the returning Trump administration. CMX coper was last up 0.80% near $436.
• Iron ore has recaptured the $100/ton handle. A better China equity backdrop, amid multiple supports, is a positive, while since Q4 last year, Iron ore has been supported sub $100/ton. Yesterday's bumper iron ore import number for China for Dec is another positive. 

Today’s 5-year bond auction demonstrated mixed demand metrics, with the auction price surpassing dealer expectations of 100.07. However, the cover ratio declined significantly to 3.8158x from 4.4177x. Meanwhile, the auction tail was unchanged compared to last month at 0.01.

• These results contrast with the stronger demand observed in this month’s 10-Year bond auction.
• Given that today’s 5-Year offering was priced approximately 15bps higher than last month, marking a cyclical peak, the outcome is likely to be viewed as somewhat disappointing.
• Following the auction, the 5-Year JGB has richened slightly in early afternoon trading, while JGB futures have weakened, retreating to session lows.

Chinese stocks surged as the US considered gradual tariff hikes, boosting sentiment alongside pledges from Chinese authorities to stabilize markets. The CSI 300 has gained 2%, ending a four-day losing streak, while the Shenzhen Composite and Shanghai Composite are 2.7% and 1.9%, respectively. Major gainers included Beijing Kingsoft Office Software (+8.7%) and Hithink RoyalFlush Information Network (+8.8%). A gauge of Chinese stocks in Hong Kong climbed 1.6%, with the Hang Seng Index benefiting from oversold conditions, last up 1.70%. Investors anticipate positive measures from a regulatory briefing on financial support for economic development later today.

• Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks. However uncertainty remains around trade policies is fueling global economic headwinds and driving up long-term borrowing costs, as per BBG.
• Chinese travel-related stocks, such as China Eastern Airlines and TongCheng Travel, gained after the government announced plans to boost tourism through the use of vouchers and expansion of its visa-free policy.
• Chinese pharmaceutical stocks rise after China vows to continuously adjust the country’s catalog of medicines covered by insurance to include qualified innovative drugs.
• GS is expecting the Chinese government to deploy extra monetary and fiscal easing and support for the home market.
• The HSI is likely benefitting from extreme oversold conditions as the HSI put/call ratio nears lows.
• Across the market, small-cap equities are outperforming large-cap today, with the CSI 1000 & 2000 up 3.55% & 4.10% respectively, while Tech stocks are the top performing sector in the CSI 300, financials & Property lagging. While in Hong Kong, the HS Tech Index is trading 3.65% higher while the Mainland Property Index is up just 1.15%.
• Some point through the session there will be a briefing from Chinese regulators, this could lead to positive headlines which could support Greater Chinese stocks.