Bond Market Update

Modest Gains Ahead of Q4 GDP

• U.S. Treasuries are on track for a slightly higher start in the belly ahead of the 8:30 ET release of the advance Q4 GDP (Briefing.com consensus 3.0%; prior 4.3%). The report will be released alongside the Personal Income/Outlays survey for December, though those figures will be factored into the GDP report. Treasury futures navigated a narrow sideways range in overnight trade even though the market received a big batch of data from Asia and Europe. Japan's CPI decelerated in January with Core CPI increasing at its slowest pace in two years. However, flash Manufacturing PMI for February (52.8) showed accelerating activity at a pace not seen since early 2022. In Europe, flash February Manufacturing and Services PMI readings from the region's major economies remained unimpressive for another month while readings from the U.K. outperformed. The U.K. also reported strong retail sales growth for January. On a side note, there has been some chatter that the Supreme Court could announce its opinion regarding tariffs today. Crude oil holds a modest loss while the U.S. Dollar Index is flat at 97.90.
• Yield Check:
  • 2-yr: -1 bp to 3.46%
  • 3-yr: -2 bps to 3.48%
  • 5-yr: -2 bps to 3.63%
  • 10-yr: -2 bps to 4.06%
  • 30-yr: UNCH at 4.70%

• News:
  • Indonesia finalized its trade agreement with the U.S.
  • Bank Indonesia held its policy rate at 4.75%.
  • Bangko Sentral ng Pilipinas cut its rate by 25 basis points to 4.25%.
  • European Central Bank President Lagarde repeated that she intends to serve through 2027 amid reports that she is looking to leave her post to get involved in shaping the next presidential election in France.
  • Japan's January National CPI was down 0.2% m/m (last -0.2%) but up 1.5% yr/yr (last 2.1%). National Core CPI was up 2.0% yr/yr, as expected (last 2.4%). Flash February Manufacturing PMI hit 52.8 (expected 51.3; last 51.5) and flash Services PMI hit 53.8 (last 53.7). · Hong Kong's January Unemployment Rate rose to 3.9% from 3.8%.
  • Australia's flash February Manufacturing PMI hit 51.5 (last 52.3) and flash Services PMI hit 52.2 (last 52.3).
  • New Zealand's January trade deficit reached NZD519 mln (expected deficit of NZD745 mln; last deficit of NZD88 mln).
  • India's flash February Manufacturing PMI hit 57.5 (last 55.4) and flash Services PMI hit 58.4 (last 58.5).
  • Eurozone's flash February Manufacturing PMI hit 50.8 (expected 49.9; last 49.5) and flash Services PMI hit 51.8 (expected 51.9; last 51.6).
  • Germany's January PPI was down 0.6% m/m (expected 0.3%; last -0.2%), falling 3.0% yr/yr (expected -2.1%; last -2.5%). Flash February Manufacturing PMI hit 50.7 (expected 49.6; last 49.1) and flash Services PMI hit 53.4 (expected 52.4; last 52.4).
  • U.K.'s January Retail Sales rose 1.8% m/m (expected 0.2%; last 0.4%), increasing 4.5% yr/yr (expected 2.8%; last 1.9%). January Core Retail Sales were up 2.0% m/m (expected 0.2%; last 0.3%), rising 5.5% yr/yr (expected 3.6%; last 2.5%). February flash Manufacturing PMI hit 52.0 (expected 51.5; last 51.8) and flash Services PMI hit 53.9 (expected 53.5; last 54.0).
  • France's flash February Manufacturing PMI hit 49.9 (expected 50.9; last 51.2) and flash Services PMI hit 49.6 (expected 49.1; last 48.4).
• Commodities:
  • WTI Crude: -0.5% to $66.10/bbl
  • Gold: +0.9% to $5041.10/ozt
  • Copper: +0.5% to $5.766/lb
• Currencies:
  • EUR/USD: UNCH at 1.1768
  • GBP/USD: +0.1% to 1.3477
  • USD/CNH: +0.1% to 6.9013
  • USD/JPY: +0.1% to 155.23
• Data out Today:
  • 8:30 ET: December Personal Income (Briefing.com consensus 0.3%; prior 0.3%), Personal Spending (Briefing.com consensus 0.2%; prior 0.5%), PCE Prices (Briefing.com consensus 0.3%; prior 0.2%), core PCE Prices (Briefing.com consensus 0.4%; prior 0.2%), advance Q4 GDP (Briefing.com consensus 3.0%; prior 4.3%) and advance Q4 Chain Deflator (Briefing.com consensus 3.3%; prior 3.8%)
  • 9:45 ET: Flash February S&P Global U.S. Manufacturing PMI (prior 52.4) and flash February S&P Global U.S. Services PMI (prior 52.7)
  • 10:00 ET: Final February University of Michigan Consumer Sentiment survey (Briefing.com consensus 57.3; prior 57.3) and December New Home Sales (Briefing.com consensus 714,000; prior NA)