Bond Market Update

Lower Start Ahead

• U.S. Treasuries are on track for a modestly lower start after facing some pressure in the overnight futures market. Treasury futures began slipping in early evening action, continuing their retreat until the start of the European session, when a rebound took shape. The selling coincided with general softness in other sovereign debt with relative weakness in Australian bonds after the release of a good employment report for January. Japan reported a big jump in Core Machinery Orders for December (+19.1% m/m; expected 5.1%), and the market will be eager to see if this strength can be sustained in the coming months since it would imply accelerating activity in Japan's economy. The U.S. session will see the release of a handful of economic reports, headlined by weekly Initial Claims (Briefing.com consensus 225,000; prior 227,000) and December Trade Balance (Briefing.com consensus -$55.8 bln; prior -$56.8 bln). Crude oil is on the verge of overtaking its January high (66.48) while the U.S. Dollar Index is up 0.1% at 97.82.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +2 bps to 3.51%
  • 5-yr: +1 bp to 3.66%
  • 10-yr: +2 bps to 4.10%
  • 30-yr: +2 bps to 4.73%

• News:
  • The European Central Bank's latest Economic Bulletin noted that the central bank needs to ensure that inflation stabilizes at the 2.0% target in the medium term.
  • European Central Bank President Lagarde told other ECB policymakers that she remains focused on her job amid recent reports that she will leave her post before the end of her term. 
  • Japan's December Core Machinery Orders jumped 19.1% m/m (expected 5.1%; last -11.0%), rising 16.8% yr/yr (expected 3.9%; last -6.4%).
  • South Korea's January trade surplus reached $8.72 bln (expected surplus of $8.74 bln; last surplus of $12.17 bln) as imports grew 11.6% yr/yr (expected 11.7%; last 4.6%) and exports rose 33.8% yr/yr (expected 33.9%; last 13.3%).
  • Australia's January Employment increased by 17,800 (expected 20,000; last 68,500) and full employment increased by 50,500 (last 56,900). January Unemployment Rate remained at 4.1% (expected 4.2%) and Participation Rate fell to 66.7% from 68.5% (expected 66.8%).
  • Eurozone's December Current Account surplus reached EUR14.6 bln (expected surplus of EUR9.8 bln; last surplus of EUR8.9 bln). December Construction Output was up 0.88% m/m (last -1.54%).
  • U.K.'s February CBI Industrial Trends Orders rose to -28 from -30, as expected.
  • Spain's December trade deficit reached EUR5.57 bln (last deficit of EUR5.68 bln).
  • Swiss January trade surplus reached CHF3.818 bln (last surplus of CHF934 mln). Q4 Industrial Production was down 0.7% yr/yr (last 2.0%).
• Commodities:
  • WTI Crude: +1.5% to $66.19/bbl
  • Gold: -0.1% to $5005.60/ozt
  • Copper: -1.7% to $5.705/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1767
  • GBP/USD: -0.2% to 1.3460
  • USD/CNH: +0.2% to 6.8999
  • USD/JPY: UNCH at 154.78
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 227,000), Continuing Claims (prior 1.862 mln), December Trade Balance (Briefing.com consensus -$55.8 bln; prior -$56.8 bln), and February Philadelphia Fed survey (Briefing.com consensus 8.5; prior 12.6)
  • 10:00 ET: January Pending Home Sales (Briefing.com consensus 1.4%; prior -9.3%)
  • 10:30 ET: Weekly natural gas inventories (prior -249 bcf)
  • 12:00 ET: Weekly crude oil inventories (prior +8.53 mln)