AUSSIE BONDS: Smoothly Absorbed With Solid Demand Metrics

USD/CNH is slightly lower changed in the first part of Monday dealing, the pair last near 7.2400, amid continued broad USD weakness. We were little changed on Friday's session, despite softer USD trends elsewhere. CNH gained 0.66% last week, but again this trailed broader USD index losses, the BBDXY index off 2.32%, the DXY down 3.51%. Broader USD sentiment faltered amid a US growth/recession concerns and a resurgent EU, led by German fiscal hopes. Spot USD/CNY finished up at 7.2459 on Friday.  The CNY CFETS basket fell 0.85% last week to 99.05, which is fresh lows in the index back to Oct last year.

• For USD/CNH technicals, we currently track close to the 200-day EMA, which is near 7.2400. Friday intra-session lows were supported sub 7.2300. The 50-day EMA sits back at 7.2750 on the topside.
• Sunday data on Feb inflation was weaker than forecast for both CPI and PPI. Food prices fell sharply, weighing on headline CPI, but core inflation also slipped to -0.10%y/y. Base effects from last year (a +1.2% gain in Feb 2024) were a factor. Still, the data emphasize the need for the authorities to continue efforts to boost domestic demand and avoid deflation risks.
• US-CH yield differentials continue to point to lower USD/CNH levels, with uncertainty around PBOC easing timing aiding CGB yields, while US yields are biased lower on growth concerns. We would expect CNH to generally lag continued USD weakness though.
• Relative equity trends also remain in CNH's favor.
• On the data front, this week is relatively quiet, with Feb new loans/aggregate finance data due. 

In Tokyo morning trade, JGB futures are weaker, -22 compared to settlement levels, after reversing early strength following today’s Labor Earnings. 

• January labor cash earnings data mostly printed below expectations. The headline was 2.8% y/y, against a 3.0% forecast and revised 4.4% Dec outcome (originally reported as a 4.8% gain). In real terms, earnings were -1.8%y/y, against a -1.6% forecast and 0.3% prior for Dec (also revised down).
• In terms of cash earnings, bonus payments fell to -3.7% y/y, versus a 6.2% gain in Dec. This likely weighed on the headline result. Scheduled pay still rose 3.1% y/y, up from 2.6% in Dec, which was a strong result.
• Feb. Bank Lending Incl. Trusts rose 3.1% y/y.
• Jan. Current-Account Deficit 257.6bn Yen; Est. -230.5bn Yen.
• Cash US tsys are 3-5bps richer across benchmarks in today’s Asia-Pac session as Asian traders digest Friday’s US jobs data and remarks from Federal Reserve Chair Jerome Powell.
• Cash JGBs are 1-3bps cheaper across benchmarks. The benchmark 10-year yield is 2.5bps higher at 1.545%, just below the cycle high of 1.553%.
• Swap rates are 2-3bps higher. Swap spreads are wider.

Large outflows for Taiwan and India capped off a poor week for Asian equity flows as uncertainty continues around tariffs and the impact on Asian economies. 

• South Korea: Recorded inflows of +$73m Friday, bringing the 5-day total to -$1445m. 2025 to date flows are -$4,035m. The 5-day average is -$289m, the 20-day average is -$150m and the 100-day average of -$117m.
• Taiwan: Had outflows of -$990m Friday, with total outflows of -$4765m over the past 5 days. YTD flows are negative at -$9911m. The 5-day average is -$953m, the 20-day average of -$361m and the 100-day average of -$159m.
• India: Saw outflows of -$303m as of the 6th, with a total outflow of -$2,834m over the previous 5 days. YTD outflows stand at -$15,230m. The 5-day average is  -$567m, the 20-day average of -$326m and the 100-day average of -$214m.
• Indonesia: Posted outflows of -$49m as of Friday , bringing the 5-day total to -$28m. YTD flows are negative at -$1,368m. The 5-day average is -$6m, the 20-day average is -$45m the 100-day average of -$33m.
• Thailand: Recorded inflows of +$42m as of Friday, totaling +$74m over the past 5 days. YTD flows are negative at -$256m. The 5-day average is -$26m, the 20-day average of -$18m the 100-day average of -$18m.
• Malaysia: Experienced outflows of -$70m Friday, contributing to a 5-day outflow of -$199m. YTD flows stand at -$1,396m. The 5-day average is -$40m, the 20-day average of -$32m the 100-day average of -$29m.
• Philippines: Saw inflows of +$3m yesterday, with net inflows of +$7m over the past 5 days. YTD flows are negative at -$252m. The 5-day average is +$1m, the 20-day average of -$8m the 100-day average of -$7m.