AUSSIE BONDS: Sharply Cheaper & At Session Cheaps After In Line Q4 GDP

In Tokyo morning trade, JGB futures have strengthened, +29 compared to settlement levels, after finishing Friday’s overnight session slightly weaker.

• “BoJ policymakers discussed the likelihood of raising interest rates further with some warning of upside inflation risks and the damage a weak yen could inflict on the economy, a summary of opinions at their January meeting showed on Monday.” (per RTRS)
• "The debate highlights an increasing chance the central bank will continue to push up borrowing costs in several stages, even after hiking short-term interest rates to 0.5% at the Jan. 23-24 meeting - the highest for Japan in 17 years."
• In today’s Asia-Pacific session, cash US tsys have twist-flattened, with yields ranging from 5bps higher to 2bps lower after the weekend’s tariff news. This week’s focus will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
• Cash JGBs are mixed across benchmarks, with yields 2bps lower to 1bp higher. The benchmark 10-year yield is 1.4bps lower at 1.231% versus the cycle high of 1.262%.
• Swap rates are 1-2bps lower. Swap spreads are slightly mixed.

• Vietnam’s PMI’s declined in January to +48.9 from +49.8 in December, the second consecutive month of contraction.
• Output declined to +49 from +50.7
• New orders fell from the prior month.
• Whilst a worrying trend, the overall state of the Vietnamese economy remains strong with 4Q GDP ahead of consensus at +7.09%, CPI moderate and exports extremely strong. 

The BoJ offers to buy a total of Y900n of JGBs from the market:

• Y150bn worth of JGBs with <1 Year until maturity
• Y300bn worth of JGBs with 1-3 Years until maturity
• Y300bn worth of JGBs with 3-5 Years until maturity
• Y150bn worth of JGBs with 10-25 Years until maturity