Bond Market Update

Long End Ahead

• U.S. Treasuries are on track to begin the holiday-shortened week with some early strength in longer tenors while the short end is on course for a flatter start. Treasury futures began climbing in early evening action, continuing their advance into the night. The market reached highs around the start of the European session, followed by some backtracking. Overnight action lacked the participation of several large markets due to Lunar New Year celebrations. Markets in China, Hong Kong, Singapore, and South Korea will remain closed tomorrow with Hong Kong scheduled to reopen on Friday, while China's markets will remain closed until next week. Underwhelming December employment figures from the U.K. boosted expectations for a March rate cut from the Bank of England while rate cuts are also being discussed in the U.S. after Fed Governor Bowman spoke in favor of three cuts in 2026 due to a weakening labor market. Precious metals endured a volatile night while crude oil is on the rise. The U.S. Dollar Index is up 0.3% at 97.24.
• Yield Check:
  • 2-yr: -1 bp to 3.40%
  • 3-yr: -2 bps to 3.43%
  • 5-yr: -3 bps to 3.58%
  • 10-yr: -3 bps to 4.03%
  • 30-yr: -4 bps to 4.66%

• News:
  • Japan's Q4 GDP report, which was released on Sunday evening, disappointed, showing growth of just 0.1% quarter-over-quarter (expected 0.4%) while the year-over-year reading was up 0.2% (expected 1.6%). The report pressured rate hike expectations for March, but the market remains confident that a hike will be announced in April.
  • Sweden's finance minister said that his country has no plans to adopt the euro in the coming years.
  • Japan's December Tertiary Industry Activity Index rose to 8.40 from -2.50.
  • New Zealand's January FPI was up 2.5% m/m (last -0.3%).
  • Eurozone's February ZEW Economic Sentiment fell to 39.4 from 40.8 (expected 45.7).
  • Germany's February ZEW Economic Sentiment rose to 58.3 from 56.9 (expected 65.8) and ZEW Current Conditions rose to -65.9 from -72.7 (expected -65.7). January CPI was up 0.1% m/m, as expected (last 0.0%), rising 2.1% yr/yr, as expected (last 1.8%).
  • U.K.'s December Average Earnings Index + Bonus rose 4.2% yr/yr (expected 4.6%; last 4.6%). December three-month employment increased by 52,000 (last 82,000) and December Unemployment Rate rose to 5.2% from 5.1%, as expected. January Claimant Count increased by 28,600 (expected 22,800; last 2,700). Q3 Labour Productivity was up 1.1% (expected -0.6%; last -0.5%).
  • Italy's December trade surplus reached EUR6.037 bln (expected surplus of EUR4.75 bln; last surplus of EUR5.056 bln).
• Commodities:
  • WTI Crude: +1.3% to $63.73/bbl
  • Gold: -1.8% to $4958.00/ozt
  • Copper: -2.1% to $5.680/lb
• Currencies:
  • EUR/USD: -0.2% to 1.1829
  • GBP/USD: -0.6% to 1.3549
  • USD/CNH: +0.1% to 6.8869
  • USD/JPY: -0.2% to 153.10
• Data out Today:
  • 8:30 ET: February Empire State Manufacturing survey (Briefing.com consensus 7.1; prior 7.7)
  • 10:00 ET: February NAHB Housing Market Index (Briefing.com consensus 38; prior 37)