ASIA CREDIT: YUEXIU: Jan Sales

Swelling €IG supply and EGB syndications continue to weigh on EGBs, with the halt of the ECB’s PEPP reinvestments also a background negative in early ‘25.

• Softer-than-expected French and Italian CPI meant that Eurozone CPI data matched expectations, negating the upside risks provided by Monday’s German reading.
• Bund futures -4 at 132.22 vs. lows of 123.13, yesterday’s range intact.
• German yields flat to 3bp higher, curve steepens. 2s10s and 5s30s remain below cycle highs.
• EGB spreads to Bunds little changed to ~1bp wider in the main, OATs under the most pressure.
• The exception comes via GGBs, which continue their run of early ’25 outperformance. GGB spreads to Bunds and OATs on for fresh cycle closing lows (~75bp and -5bp, respectively).
• A conservative PDMA issuance target factors into early ’25 GGB tightening.
• ECB-dated OIS little changed to a couple of bp more dovish, showing 101.5bp of cuts for ’25, with a 25bp cut later this month near fully discounted.
• Gilt futures -25 at 91.70 vs. lows of 91.68. Initial support at 91.64 untested.
• Yields 2-3bp higher, curve steeper.
• 10s as high as 4.645%, Dec high at 4.651%. Spread to Bunds 2bp wider at 218bp.
• The presence of 30-Year gilt supply weighed on gilts in early trade.
• 30-Year gilt yields hit the highest level seen since 1998 ahead of the auction.
• The auction was taken down smoothly, which allowed UK paper to stabilise.
• Issuance should dominate locally, with no major European & UK risk events scheduled through the close.
• Elsewhere, U.S. ISM services & JOLTS data due later, Fedspeak from Barkin also slated.

• Despite yesterday’s rejection of the WaPo Tariff article by President-Elect Trump, the greenback is under pressure once again Tuesday, with markets taking a more cautious view of the underlying bullish dollar trend.
• While some analysts believe there may be some truth behind the details of the tariff article, others point to Michael Barr's resignation as the Fed's Vice Chair for Supervision as contributing to the softer greenback, assisted by the initial rally for the US KBW regional banks index in anticipation of less stringent regulations on banks' balance sheets.
• EURUSD is back above 1.04, with German inflation data on Monday continuing to underpin a more hawkish short-term reaction for the single currency. Monday’s strong gains appear - for now - corrective. The 20-day EMA, at 1.0412, has been pierced and the next resistance to watch is 1.0458, the Dec 30 high. ING suggest that short-term fair value models – based largely on rate spreads – suggest EUR/USD could correct further to 1.05.
• The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF closing in on 2-month highs for the cross at 0.9447.