RBNZ: Updated RBNZ OCR Projections

• Tsys futures have opened lower in Asia, while there will be no cash tsys trading until Tuesday. Longer-dated contracts are underperforming this morning after curves bear-flattened on Friday. TU is the only contract not trading below Friday's lows, -00¾ at 102-22¾, while TY is -04+ at 108-13
• Projected rate cuts through mid-2025 cooling again, current lvls vs. Friday morning* as follows: Jan'25 at -0.1bp, Mar'25 at -6.9bp (-8bp), May'25 -12.6bp (-14.6bp), Jun'25 -21.6bp (-24.6bp), Jul'25 at -25.4bp (-29.1bp).

• Foreign holdings of tsys rebounded in November, rising by $51.6b to $8.63t, nearing the all-time high of $8.67t recorded in September. Gains were widespread, with China increasing its holdings by $8.5b to $768.6b, and the UK adding $22.3b to reach $765.6b. Meanwhile, Japan, the largest holder, saw a decline of $3.1b to $1.1t. Belgium's holdings rose by $11.7b to $361.3b, potentially reflecting custodial accounts for China. Conversely, the Cayman Islands, a hub for hedge funds, reduced holdings by $12.7b to $397b.

In Tokyo morning trade, JGB futures are slightly firmer, +2 compared to settlement levels.

• Japan Nov core machine orders data comfortably beat expectations. We were up 3.4% m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms, we rose 10.3%, against a 4.2% forecast (prior as 5.6%).
• The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
• This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop.
• The cash US tsy market and stock exchanges are closed today for Martin L. King Day. Also noteworthy, the Federal Reserve entered their policy Blackout at midnight Friday through January 30.
• Cash JGBs are little changed across benchmarks. The benchmark 10-year yield is 0.6bps higher at 1.209% versus the cycle high of 1.262%.
• Swap rates are slightly lower. Swap spreads are slightly tighter.

Early G10 FX trends are biased slightly against the USD, although FX pairs remain within recent ranges. The BBDXY index was last down a touch near 1315.30, off nearly 0.10%. 

• Most currencies are up around 0.10-0.15% at this stage versus the USD. AUD/USD is back to 0.6200, NZD near 0.5595, so well within recent ranges. USD/JPY is at 156.10/15, EUR/USD around 1.0285, with these pairs also tracking recent ranges.
• In the cross asset space, US equity futures are down 0.15-0.20%, after firm cash gains in Friday trade. It is Martin Luther King day today, so no cash tsys trading takes place. US bond futures are down slightly in early trade.
• The data calendar has seen Japan core machine orders beat, but market impact has been limited. We have the China loan prime rate decision coming up, but no change is expected. More Japan data is out later on, but it is second tier.
• Market focus is on the Trump inauguration later on Monday. The market could experience significant turbulence if Trump follows through with plans to sign up to 100 executive orders on Day 1, by far the largest raft of actions ever taken by a new president. Focus will be on tariffs, but border security and immigration-related orders are likely to make up the bulk of Day 1 actions.  
• Earlier Trump spoke at a pre-inauguration rally. High level comments on these issues were mentioned but details remained light.