AUSSIE BONDS: Yield Curve Closes In On Cycle High

G10 currency moves have generally been limited with holiday-impacted trading thin. The greenback has trended lower through most of the session after yields fell on Monday, the BBDXY USD index is down 0.1%. The yen has moved the most against the US dollar with USDJPY down 0.3% to 156.42, close to the intraday low. JPY strengthened on Monday as US equities sold off and that trend has continued today with US equity futures slightly lower.

• AUDUSD is up 0.1% to 0.6229, close to the intraday high, after a low of 0.6211 earlier. It may face downward pressure with A$620mn of options due to expire on January 2 at 0.6175. There is also little support for Aussie from risk appetite. AUDJPY is down 0.2% to 97.42.
• NZDUSD is moderately higher at 0.5642 following a drop to 0.5633. AUDNZD is up 0.1% to 1.1040.
• EURUSD and GBPUSD are slightly higher at 1.0411 and 1.2559 respectively.
• Japan, South Korea and Thailand are closed and the equity markets that are open are currently mixed. The Hang Seng is up 0.2% but the CSI 300 is down 0.2% and the ASX -0.6%. Copper is up 0.1% and iron ore is around $101/t.
• Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
• US October house price data and December Dallas Fed print later. 

China’s PMI data showed activity expanding at a faster rate in December driven by the non-manufacturing sector with industry remaining lacklustre. The composite PMI picked up to 52.2 from 50.8 due to a 2.2 point rise to 52.2 in services, which was stronger than expected. 

• Manufacturing disappointed though with the PMI moving closer to the breakeven-50 mark at 50.1 after 50.3 last month. Lacklustre domestic growth has prompted officials to announce that there will be more fiscal and monetary stimulus in 2025, but details remain vague.
• The better-than-expected non-manufacturing PMI has supported USDCNH with most of its decline today sustained with the pair at 7.3057 close to its intraday low at 7.3053. The CSI 300 opened little changed and is currently down moderately. 

On an abbreviated last session of the year, NZGBs closed richer, with benchmark yields 4-8bps lower. 

• The local calendar was empty today. CoreLogic Home Values will be released on January 2.
• There has been no cash dealing in US tsys today with Japan out for a bank holiday. TYH5 is +0-03+ firmer at 109-02+ after Monday’s solid gains. Today’s US data (prior, est) includes FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, Dallas Fed Services Activity (9.8, --) at 1030ET.
• Swap rates closed 5-7bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed little changed across meetings. 55bps of easing is priced for February, with a cumulative 123bps by November 2025.