US TSYS: Tsys Futures Pare Morning Losses, 10yr Yield at 4.50%

NZGBs closed cheaper, with the 10-year yield 4bps higher at 4.46%, the day's high. However, on a relative basis, the NZ 10-year outperformed its $-bloc counterparts, with the NZ-US and NZ-AU differentials closing 1-2bps wider. 

• It was offshore factors that drove the local market, with the local calendar light again this week. Tomorrow’s release of ANZ Commodity Prices is the sole release for the week.
• On that front, cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after Friday’s heavy close.
• Swap rates closed 3-7bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed 1-4bps firmer for meetings out to July. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.

Gold is a touch higher in the first part of Monday dealings, last near $2641. This follows Friday's 0.67% loss, amid a generally supported US yield backdrop and caution from Fed officials around the inflation outlook. Bullion is still up from end 2024 levels ($2624.5).  

• US yields have pushed higher today (+1-2bps firmer), although hasn't weighed materially on gold at this stage.
• Spot gold is close to the 20 and 50-day EMA support zones, although the 100-day, which sits near $2600, is arguably more important. We tested sub this support zone on a number of occasions through late 2024 but each time the dip was supported.
• A fresh cycle high in the US 10yr real yield may see gold revisit these lows. On the topside, gold has found selling interest above $2700 since late November.
• Focus will rest on the FOMC minutes and US NFP print later this week. 

Oil prices are off their intraday high to be down slightly during APAC trading today but are still close to the three-month high. Brent rose to $76.89/bbl but is now down 0.1% to $76.47. WTI reached $74.39/bbl before trending down to $73.90. The USD index is down 0.1% but off its intraday low.

• Some Middle Eastern pricing is signalling that demand has picked up from Asia and markets are waiting for prices from Saudi Arabia to confirm this. Crude from sanction-hit Iran and Russia has become scarcer, as sanctions target their shadow fleets.
• The market continues to expect excess supply in 2025 with demand from China likely to remain soft and non-OPEC supply forecast to rise with the risk OPEC+ decides to begin output normalisation. Morgan Stanley is projecting a surplus of around 700kbd this year. But there is a lot of uncertainty surrounding the new US administration and geopolitics.
• Later the Fed’s Cook speaks. US & European December services/composite PMIs and preliminary December German CPI data are released.