EQUITIES: Sentiment Deteriorates, HK Tech Weaker, US Futures Back In The Red

NZGBs closed slightly mixed in the middle of the session’s ranges on a data-light day. 

• NZGBs did, however, manage to slightly outperform ACGBs, with the NZ-AU yield differential 1bp tighter on the day.
• There has been no cash trading for US tsys in Asia-Pac session today with Japan out for the Foundation Day Holiday. TYH5 is little changed.
• Swap rates closed 1-3bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed little changed. 49bps of easing is priced for February, with a cumulative 121bps by November 2025.
• “NZ’s residential construction market may start to recover in 2H of 2025, the Treasury says in Fortnightly Economic Update. ANZ business survey shows residential building intentions are highest since 2021.” (per BBG)
• Today, the local calendar was empty. Tomorrow Treasury Chief Economic Adviser Dominick Stephens will deliver a presentation titled ‘The State of the Economy’. The next data release is Card Spending on Thursday.
• NZ Debt Management has issued NZ$5.5bn of May 2035 bonds via a syndicated tap. The bonds, which carry a coupon of 4.50%, were issued at a spread of 11bps over the 15 May 2034 nominal bond, at a yield to maturity of 4.65%. Total book size, at final price guidance, exceeded NZ$21.5bn. 

• China’s Bond Futures were mixed today as the cash market appears to have shaken off yesterday’s weaker day, to rally again.
• China’s 10YR future opened at 109.21 and was strong early before selling off down to 109.18; with a recovery setting in mid-morning to regain those losses and reach 109.27.
• The 10YR future had traded back down towards the 20-day EMA of 109.16, but today’s move higher sees it trade further away.
• The 2YR future’s fortunes today were somewhat different.  Opening at 102.648 it moved higher initially to 102.65, before giving those early gains back down to 102.57.  The afternoon session saw some of those losses regained as it trended back up to 102.62.
• The move lower puts the 2YR future on the 100-day EMA of 102.61, with the next technical level lower the 200-day EMA at 102.37.
• It is a light week in China for data with January’s FDI release, New Yuan Loans an Aggregate financing the key data out.
• This week sees some sizeable bond auctions by the government on Friday with a CNY100bn 2026 and a CNY20bn 2074 to be issued. 

Oil prices have been trading in a narrow range during the APAC session today with little reaction to tariff news and as markets wait for key US CPI data due on Wednesday. Brent is up 0.3% to $76.07/bbl after a high of $76.20 and a low of $75.90. WTI is 0.2% higher at $72.48 following a peak of $72.61 and trough of $72.31. The USD is 0.1% stronger.

• Oil rallied on Monday on a tighter supply outlook due to stricter sanctions resulting in Russia producing below its quota. It has held onto those gains today.
• In recent weeks, there has been a large US crude stock build as Canadian flows rose sharply to beat tariff deadlines. Industry-based US inventory data is released later today and there may be a slowdown as Canada negotiated last week a 30-day delay in the imposition of US tariffs but then producers may continue frontloading shipments to the US just in case they are still implemented in March. A 10% import tariff on Canadian oil was proposed.
• While there hasn’t be a material reaction to US President Trump signing the steel/aluminium tariff order today, oil markets remain concerned that an increase in protectionism will reduce global demand. He said that pharmaceuticals, autos and chips will now be considered.
• Risks to the Gaza ceasefire deal are contributing to increased geopolitical tensions, as well as the US’ tougher stance on Iran.
• Later US January NFIB small business optimism prints and Fed Chair Powell testifies to the senate and Fed’s Hammack, Williams and Bowman speak. Q4 French unemployment is released and the ECB’s Schnabel appears, and BoE’s Mann & Bailey speak.