US TSYS: Tsys Yields Decline As Tariffs Are Delayed & Soft Jobs Data

Oil prices rose around a percent on Friday to continue the uptrend seen during the week. Better risk appetite, continued US crude drawdowns and technicals seem to have outweighed pessimism over China’s economy. The USD index fell 0.1% driven by stronger US equities, which also supported dollar-denominated crude.

• WTI rose 1.3% to $74.07/bbl to be up almost 5% last week, above resistance at $73.73 opening up $73.96. The bull trigger is at $76.41. It reached a peak of $74.35, the highest since early October.
• Brent finished last week up almost 4% after a 1.0% rise on Friday to $76.69/bbl, breaching initial resistance at $76.55 opening $79.50, key resistance. It made an intraday high of $76.73.
• Goldman Sachs estimates that “oil prices are a few dollars undervalued” currently.
• The election of Trump as the next US President has increased expectations that US oil production will rise. However, before the end of his term President Biden is likely to ban new offshore oil and gas projects covering around 625mn acres of coast, according to Bloomberg. The area includes the Atlantic, Pacific and eastern Gulf of Mexico. The decision is likely to be announced today.

• RES 3: 96.380 - High Mar 21 2023
• RES 2: 97.190 - High May 5 2023 
• RES 1: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg 
• PRICE: 96.160 @ 14:55 GMT Jan 03
• SUP 1: 96.000 - Low 19 Dec ‘24
• SUP 2: 95.750 - Low 27 Nov ‘23
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

Aussie 3-yr futures have started the year broadly flat, keeping the near-term trend neutral. Any further stabilisation and move higher would reinstate a bullish condition and signal scope for an extension. The key resistance here is at 96.730, the Sep 17 high. For bears, a stronger reversal lower would refocus attention on 95.760 where a break would instead highlight a stronger bearish set-up. 

ACGBs (YM -4.0 & XM -4.0) are cheaper after US tsys finished last week weaker following the December manufacturing ISM survey, which beat expectations. The headline reading of 49.3 improved from 48.4 prior and a 9-month high, besting the survey expectation of 48.4.

• This week, US economic data and Treasury supply are being brought forward to accommodate Thursday's "day of mourning" to honour President Carter.
• Cash ACGBs are 4-9bps cheaper, with the 5-year underperforming. The AU-US 10-year yield differential is at -18bps.
• Australia's S&P Global Dec. PMIs showed: Services PMI 50.8 vs 50.5 in Nov. and Composite Unchanged at 50.2.
• Swap rates are 3bps higher.
• The bills strip is showing -2 to -3 across contracts.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings. A 25bp rate cut is more than fully priced by April (118%), with a February cut at a 58% chance.
• The local calendar heats up this week with the release of November CPI data on Wednesday. The calendar also sees Building Approvals and Private Sector Finance tomorrow and Retail Sales and Trade Balance on Thursday.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.