AUSTRALIA DATA: Sharp Rise In Exports To US But Weak To Asia

BoJ-dated OIS pricing is flat to 5bps softer across meetings through October compared to pre-MPM levels. 

• Prior to the January 23–24 MPM, market expectations reflected a 98% probability of a 25bp hike, a cumulative 99% chance by March, and more than a full 25bp increase (108%) priced in by May 2025.
• Currently, the probability of another 25bp hike in March stands at 0%, with a full 25bp increase not priced in until December.

Figure 1: BoJ-Dated OIS – Today Vs. Pre-BoJ MPM (January)

Source: MNI – Market News / Bloomberg

This month, the 10-year auction offers an outright yield at a fresh cyclical peak of 1.268%, 10-15bps higher than last month. 

• Additionally, the yield curve between 2- and 10-year bonds has steepened slightly compared to the prior month.
• Today’s auction is also likely to be supported by an improvement in sentiment toward global long-end bonds over the past month. For instance, the US 10-year yield is roughly 25bps lower than its early January high.
• The relative affordability of 10-year JGBs versus futures— gauged by the 7- to 10-year spread — sits little changed relative to last month, after bouncing off the lower end of its range over the past year during the month.
• Amid this backdrop, it will be interesting to see if the current 10-year yield generates sufficient demand at today’s auction.
• Results are due at 0435 GMT / 1235 JT.

AUDUSD rose to a high of 0.6233, above initial resistance, following the announcement that US tariffs on Canada would be delayed for 30 days but has trended lower since then to an intraday low of 0.6199 despite stronger risk appetite. It is currently down 0.4% to 0.6203 possibly weighed by the lack of an agreement between the US and China to avoid 10% tariffs from today but apparently talks are ongoing. China is Australia’s largest export destination. The USD index is off its low but still down 0.2%. 

• Aussie is weaker against other major currencies with AUDJPY down 0.1% to 96.30, just off the intraday low. AUDNZD is 0.1% lower at 1.1051 after a trough of 1.1043 and AUDCAD -0.2% to 0.8970 after a high of 0.8985 earlier today. AUDEUR is down 0.1% to 0.6012 and AUDGBP -0.1% to 0.4996.
• Total Australian household spending volumes rose 1.4% y/y in Q4 up from 0.2% in Q3 signalling a pickup including a solid quarterly rise in the national accounts version due on March 5.
• Equities are generally rallying with the ASX up 0.4%, Hang Seng +1.6% and S&P e-mini +0.3%. Oil prices are lower with WTI -1.1% to $72.36/bbl. Copper has continued to move higher up 0.7% and iron ore remains around $104-105/t.
• The Fed’s Bostic and Daly speak later and US December JOLTS job openings and orders print. France’s December budget statistics and January Spanish unemployment are also out.