AUSSIE BONDS: Strong Jobs Data Weighs On Market, AU-US 10Y Diff Back Above Flat

USD/JPY got to fresh lows of 154.78 in earlier dealings, but once again found support sub the 155.00 level. We were last 155.10/15, still around 0.35% stronger in yen terms, the only G10 currency tracking up against the USD. Yen is comfortably up over 1% against CAD, and around 1.4% firmer against MXN.  

• Yen has benefited from the weakness in US yields, which have largely ignored earlier Trump tariff threats (25% hike on imports from Canada and Mexico, implemented on Feb 1). US-JP yield differentials have maintained their downtrend.
• Today's move has seen a test sub the 50-day EMA, but so far we haven't been able to sustain it.
• We have also had comments from Japan's top FX diplomat Mimura. Mimura stated that a threat to real wages (and therefore consumption) is a from a spike in imported inflation. Given close links between import prices and USD/JPY changes this should be supportive of the yen backdrop all else equal.
• Mimura reiterated the central bank decision will be made independently this week.  

Chinese and Hong Kong equities saw heightened volatility earlier however all major benchmarks now trade higher, influenced by US President Donald Trump's tariff threats and a delay in the TikTok ban. The Hang Seng Index is 1%, while the HSTech Index gained 2.4%. Mainland indices like the CSI 300 and Shanghai Composite are 0.4% and 0.2% higher, respectively. Semiconductor and AI-related stocks rallied on news of a major government chip fund investment, while property developer Country Garden surged 19.6% after resuming trading post-suspension.

• Trump hinted at significant tariffs on China if Beijing fails to approve a TikTok deal, he wants a JV where the US owns 50%, adding to market uncertainty.
• Semiconductor stocks are trading higher following a government-backed AI and chip fund initiatives. SMIC (+5.1%), Hua Hong Semi (+2.8%), and HG Semiconductor (+6.3%).
• Country Garden Resumes trading, with shares climbing almost 20% after a nine-month suspension, following a debt restructuring proposal.
• There is still somewhat of a cautious sentiment, with gains in Hong Kong markets were capped by pre-Lunar New Year caution and potential policy reversals by the US administration.

NZGBs closed sharply richer and at session bests, with yields 7bps lower.

• Today’s move was all about US tsys. Cash US tsys are 6-9bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
• Card spending in NZ rose 1.5% m/m in December, the highest since February. 125bp of monetary easing appears to be encouraging consumers to spend again.
• Swap rates closed 6-7bps lower.
• RBNZ dated OIS pricing closed slightly mixed. 44bps of easing is priced for February, with a cumulative 108bps by November 2025.
• Tomorrow, the local calendar will see Q4 CPI data including the RBNZ’s estimates of core.
• Bloomberg consensus forecasts for headline inflation are in line with the RBNZ’s November projections at 2.1% y/y, 0.1pp moderation from Q3. The expected quarterly increase of 0.5% is slightly higher than the RBNZ’s 0.4%.
• The Q3 sector factor model measure of core was at 3.4%. Following the sharp contraction in Q3 and Q4 growth, another 50bp rate cut on February 19 is likely, especially if inflation prints around the band’s mid-point.