US TSYS: Tsys Steady In Early Trading, Focus Turns To PPI

In Tokyo morning trade, JGB futures are weaker, -49 compared to settlement levels, as trading resumes following yesterday’s holiday.

• According to MNI’s technicals team, a clear downtrend in JGB futures remains intact and the latest fresh cycle lows, reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively.
• Bank Lending Incl. Trusts rose 3.1% y/y in December, while the Adj. Current-Account Surplus printed 3.03trn yen vs. est. +2.58trn yen. Trade Surplus 97.9bn yen vs. est. -34.6bn yen.
• Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off. US PPI data will be released later today, ahead of CPI data tomorrow.
• Cash JGBs are 3-5bps cheaper across benchmarks. The benchmark 5-year yield is 0.39bps higher at 0.868% ahead of today’s supply.
• Swap rates are 1-3bps higher, with a steepening bias. Swap spreads are mixed.

Early USD losses have been pared. The BBDXY index was last near 1317, after opening near 1314 on potential gradual tariff headlines (just above pre NFP levels from Friday). We are still around 0.20% weaker versus end NY levels on Monday. Uncertainty around what will actually be delivered, coupled with getting close to pre NFP levels from last week, may have induced some USD dip buying.  

• Higher beta plays are still outperforming, albeit on a relative basis. NZD/USD remains up 0.30%, but is back sub 0.5600. AUD/USD is back near 0.6185, only 0.10% higher for the session.
• USD/JPY has rebounded back above 157.50, earlier lows were at 157.12. We are little changed for the session. EUR and GBP are back close to flat as well. GBP/USD remains above 1.2200.  USD/CNH has pared losses, back above 7.3400, while USD/MXN is around flat, last close ton 20.65.
• In the cross asset space, US equity futures hold higher, but away from best levels fort he session. Eminis were last +0.25%. US yields opened lower, but are edging higher in latest trade, the 10yr Tsy yield back close to flat above 4.77%.
• We've had Australia and Japan data, but sentiment hasn't been shifted. The Westpac Australian consumer sentiment index fell to 92.1,a 0.7% decline. IN Japan the trade and current account surpluses were better than projected. 
• Coming up, the main focus will be on the BoJ Deputy Governor's speech, due in around 40mins. 

• Asian markets are trading mixed today, following a choppy Wall Street session. South Korea's KOSPI rose 0.50%, led by gains in tech stocks like Samsung Electronics and shipbuilders such as HD Hyundai Heavy Industries. Australia’s ASX 200 climbed 0.3%, supported by miners and financial stocks, despite weaker consumer confidence. Japan’s Nikkei 225 is 0.45% lower, while the TOPIX trades unchanged as trading resumes after a holiday, while Hong Kong futures suggest a flat open.
• China has increased support for the yuan, addressing market disruption as the currency nears record lows. Regional sentiment remains cautious ahead of U.S. inflation data and earnings season, with energy producers benefiting from Monday’s oil rally.
• Australian consumer sentiment fell slightly in January, with the Westpac Consumer Sentiment Index dropping 0.7% to 92.1 from 92.8 in December 2024. Current conditions sub-indexes declined, including a 7.8% drop in financial assessments over the past year, particularly among homeowners. However, forward-looking measures showed stability, with the five-year economic outlook rising 0.7% to 96.6, signaling potential improvement ahead.