Bond Market Update

Inching Lower

• U.S. Treasuries are on track for a slightly lower start after another subdued night. Treasury futures faced some pressure during the early part of the Asian session before nestling into a sideways range that has remained in effect over the past few hours. Once again, the overnight volume was on the lower side due to continued Lunar New Year closures, though the market received some noteworthy data, including cool CPI from the U.K. and France. Also of note, Japan's trade minister announced that $36 bln will be invested into three projects in the U.S. as part of the trade deal. The U.S. session will feature a full data slate and the U.S. Treasury will sell $16 bln in 20-yr bonds at 13:00 ET. Crude oil is on the rise while the U.S. Dollar Index is up 0.1% at 97.20.
• Yield Check:
  • 2-yr: +1 bp to 3.45%
  • 3-yr: +1 bp to 3.48%
  • 5-yr: +1 bp to 3.63%
  • 10-yr: +1 bp to 4.06%
  • 30-yr: +1 bp to 4.69%

• News:
  • The Reserve Bank of New Zealand left its official cash rate at 2.25%, as expected. The central bank's forward guidance left the door open for a rate hike by the end of the year.
  • European Central Bank President Lagarde is reportedly planning to leave her post before the French presidential election in early 2027, though her term as ECB president does not end until October 2027.
  • European Central Bank policymaker Villeroy de Galhau said that French growth is expected to exceed 1.0% this year, adding that the ECB has won the battle against inflation.
  • Japan's January trade surplus reached JPY460 bln (expected deficit of JPY180 bln; last deficit of JPY60 bln) as imports fell 2.5% yr/yr (expected 3.0%; last 5.2%) and exports jumped 16.8% yr/yr (expected 12.0%; last 5.1%).
  • Australia's January MI Leading Index was down 0.1% m/m (last 0.1%). Q4 Wage Price Index was up 0.8% qtr/qtr, as expected (last 0.8%), rising 3.4% yr/yr (last 3.3%).
  • New Zealand's Q4 Input PPI was down 0.5% qtr/qtr (expected 0.4%; last 0.2%) but up 0.1% qtr/qtr (expected 0.6%; last 0.6%).
  • U.K.'s January CPI was down 0.5% m/m, as expected (last 0.4%), rising 3.0% yr/yr, as expected (last 3.4%). January Core CPI was down 0.6% m/m (expected -0.7%; last 0.3%), rising 3.1% yr/yr (expected 3.0%; last 3.2%). January Input PPI was up 0.4% m/m, as expected (last -0.5%) and Output PPI was unchanged m/m (expected 0.2%; last -0.1%). January House Price Index rose 2.4% yr/yr (expected 1.8%; last 2.5%).
  • France's January CPI was down 0.3% m/m, as expected (last 0.1%), rising 0.3% yr/yr, as expected (last 0.8%).
• Commodities:
  • WTI Crude: +2.7% to $63.99/bbl
  • Gold: +0.9% to $4950.10/ozt
  • Copper: +1.2% to $5.71/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1839
  • GBP/USD: +0.1% to 1.3570
  • USD/CNH: +0.1% to 6.8862
  • USD/JPY: +0.2% to 153.66
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 2.8%; prior -0.3%)
  • 8:30 ET: December Housing Starts (Briefing.com consensus 1.320 mln; October 1.246 mln) and December Building Permits (Briefing.com consensus 1.412 mln; October 1.330 mln), December Durable Orders (Briefing.com consensus -2.6%; prior 5.3%) and Orders ex-transportation (Briefing.com consensus 0.3%; prior 0.5%)
  • 9:15 ET: January Industrial Production (Briefing.com consensus 0.4%; prior 0.4%) and Capacity Utilization (Briefing.com consensus 76.5%; prior 76.3%)
  • 14:00 ET: January FOMC Minutes
  • 16:00 ET: December Net Long-Term TIC Flows (prior $220.2 bln)
• Treasury Auctions:
  • 13:00 ET: $16 bln 20-yr Treasury bond auction results