AUSSIE BONDS: Richer With US Tsys As PPI & Risk-Off Drives Bid

In local morning trade, NZGBs are 1-3bps cheaper after US tsys bear-steepened, with yields 1-4bps higher. 

• Many listened from the sidelines as Fed Chairman Powell repeated his January FOMC press conference at his Senate Banking Committee testimony today. Expect similar at Wednesday's testimony to the House.
• Treasury futures bounced briefly but finished weaker after the $58bn 3Y note auction drew a 4.300% high yield vs. 4.312% WI.
• Focus on key CPI inflation data today at 0830ET.
• The ANZ light traffic index rose 1% m/m in January, while the heavy traffic gauge jumped 4% m/m.
• “Westpac sees NZ inflation accelerating to a peak of 2.7% in the 3q this year, according to new forecasts published Wednesday. Previously saw inflation peaking at 2.3% in 3q.” (per BBG)
• Swap rates are flat to 2bps higher.
• RBNZ dated OIS pricing is unchanged. 49bps of easing is priced for February, with a cumulative 121bps by November 2025.
• Today, Treasury Chief Economic Adviser Dominick Stephens will deliver a presentation titled ‘The State of the Economy’ at 0930 NZT. The next data release is Card Spending tomorrow.  

• Malaysia to Sell MYR5 Billion 2031 Bonds
• Bank of Korea to Sell 500 Billion Won 1-Year Bonds
• South Korea to Sell 2 Trillion Won 63-Day Financial Bills
• Vietnam To Sell VND 1.0Tln 2040 Bonds; (TD2540037)
• Vietnam To Sell VND 0.5Tln 2055 Bonds; (TD2555052)
• Vietnam To Sell VND 10.0Tln 2035 Bonds; (TD2535022)
• Vietnam To Sell VND 0.5Tln 2029 Bonds; (TD2429008)
• India to Sell 80 Billion Rupees 364-Day Bills
• India to Sell 80 Billion Rupees 182-Day Bills
• India to Sell 120 Billion Rupees 91-Day Bills

• NZDUSD rose 0.25% to 0.5655 on Tuesday and is testing the 20-day EMA at 0.5653, a key resistance level. The move was largely on the back of USD weakness as Powell signaled patience before further rate cuts, prompting a 0.3% decline in the BBDXY.
• A sustained move above this mark could strengthen the bullish outlook, while failure to hold may lead to renewed selling pressure. The RSI has risen to 51, indicating improving sentiment, but the flat MACD histogram suggests limited bullish momentum. Key support levels are seen at 0.5620 and 0.5600.
• The RBNZ is expected to maintain its easing bias next week due to labor market weakness, with markets anticipating further rate cuts beyond the 125bps already delivered. Additionally, concerns over inflationary pressures from Trump's newly imposed tariffs on steel and aluminum are adding uncertainty to the markets.
• Westpac now expects NZ inflation to peak at 2.7% in Q3 2025, up from its previous estimate of 2.3%, driven by NZD depreciation and higher import costs, including gasoline. Inflation is projected to ease to 2.6% in Q4 2025 and reach 2% by Q4 2026. The RBNZ is expected to cut the OCR to 3.75% next week and to 3.25% in Q2 2025 but may start tightening again in Q2 2026. Westpac warns that the inflation rebound could be a concern for the RBNZ after its efforts to bring it back to target, as per BBG.
• Expiries: 0.5760 (NZD411.1m), 0.5725 (NZD399.9m), 0.6300 (NZD301.6m). Upcoming notable strikes: 0.5580 (NZD308.9m Feb. 14)
• RBNZ dated OIS pricing is holding steady across the next few meeting, The market is pricing in a 88% chance of a 50bps cut for Feb, another 25bps cut priced for April, and cumulative 123bps of cuts by Nov 2025, down from 135bps last Wednesday
• There is nothing on the local calendar today