Bond Market Update

Short End Ahead as CPI Looms

• U.S. Treasuries are on track for a slightly higher start in most tenors ahead of the 8:30 ET release of January CPI (Briefing.com consensus 0.3%; prior 0.3%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%). Treasury futures followed yesterday's rally to fresh February highs in longer tenors with a slow overnight retreat that finally found some support after the start of the European session. Global equity markets have had a mostly lower showing to end the week while the news flow was limited. There was growing speculation that President Trump will extend the current trade terms with China when he meets with President Xi in April. There were also reports that tariffs on metals and aluminum goods could be reduced. Crude oil is deepening yesterday's retreat while the U.S. Dollar Index is up 0.1% at 97.06.
• Yield Check:
  • 2-yr: -2 bps to 3.45%
  • 3-yr: -1 bp to 3.50%
  • 5-yr: -1 bp to 3.66%
  • 10-yr: UNCH at 4.10%
  • 30-yr: +1 bp to 4.74%

• News:
  • An adviser to Japan's Prime Minister Takaichi said that the Bank of Japan may forego a rate hike in March but is likely to raise rates later in the year.
  • Officials from the U.S. and Taiwan formalized a trade deal.
  • European Central Bank policymaker Kazaks said that the ECB is in a good position regarding rates while policymaker Nagel said that geopolitical "rivalries" could result in higher inflation.
  • China's January New Loans reached CNY4.71 trln (expected CNY5.00 trln; last CNY910 bln), January outstanding loans grew 6.1% yr/yr (expected 6.2%; last 6.4%), and January total social financing reached CNY7.22 trln (expected CNY7.05 trln; last CYN2.21 trln). January House Prices were down 3.1% yr/yr (last -2.7%).
  • South Korea's January Import Price Index was down 1.2% yr/yr (last 0.5%) while export price index was up 7.8% yr/yr (last 5.0%).
  • New Zealand's January Business PMI hit 55.2 (last 56.1). December External Migration & Visitors rose 7.0% yr/yr (last 8.2%). Q1 Inflation Expectations accelerated to 2.4% from 2.3%.
  • Eurozone's Q4 GDP expanded 0.3% qtr/qtr, as expected (last 0.3%), growing 1.3% yr/yr, as expected (last 1.4%). Q4 Employment increased by 0.2% qtr/qtr (expected 0.1%; last 0.2%), rising 0.7% yr/yr (expected 0.6%; last 0.6%). December trade surplus reached EUR12.6 bln (expected EUR11.8 bln; last EUR9.3 bln).
  • Germany's January WPI was up 0.9% m/m (expected 0.1%; last -0.2%), rising 1.2% yr/yr (last 1.2%).
  • Spain's January CPI was down 0.4% m/m, as expected (last 0.3%) but up 2.3% yr/yr (expected 2.4%; last 2.9%). January Core CPI was up 2.6% yr/yr, as expected (last 2.6%).
  • Swiss January CPI was down 0.1% m/m (expected 0.0%; last 0.0%) but up 0.1% yr/yr, as expected (last 0.1%).
• Commodities:
  • WTI Crude: -0.6% to $62.48/bbl
  • Gold: +0.8% to $4986.90/ozt
  • Copper: -0.8% to $5.738/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1862
  • GBP/USD: -0.1% to 1.3606
  • USD/CNH: +0.2% to 6.9051
  • USD/JPY: +0.4% to 153.27
• Data out Today:
  • 8:30 ET: January CPI (Briefing.com consensus 0.3%; prior 0.3%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%)