Bond Market Update

Intraday Bounce Runs Into Weak Auction

• U.S. Treasuries recorded modest losses on Wednesday, with most tenors deepening their pullback from their best levels of the year. Intraday action was largely uneventful after a night that was also free of major surprises. There was some improvement in global risk sentiment and growing speculation about a steeper rate hike path from the Reserve Bank of Australia. Treasuries started the day with modest losses, but the long bond outperformed from the start while shorter tenors followed a bit later. However, the early afternoon saw a pullback across the curve after the U.S. Treasury followed yesterday's soft 2-yr note sale with a much weaker 5-yr note offering. The post-auction pullback returned the long bond into the red, leaving it with a slight loss, while shorter tenors finished near their starting levels. Crude oil slipped back below $65.50/bbl while the U.S. Dollar Index dipped 0.2% to 97.69.
• Yield Check:
  • 2-yr: +1 bp to 3.47%
  • 3-yr: +3 bps to 3.49%
  • 5-yr: +2 bps to 3.62%
  • 10-yr: +2 bps to 4.05%
  • 30-yr: UNCH at 4.69%

• News:
  • President Trump repeated his call for banning institutional investors from buying single-family homes during the State of the Union address last evening.
  • OPEC+ will reportedly consider an output increase at this week's meeting, according to Reuters.
  • China's Ministry of Commerce threated to impose countermeasures on the U.S. after the new global tariff took effect.
  • China's Foreign Ministry has not confirmed President Trump's visit, which is expected at the end of March/start of April.
  • German Chancellor Merz called for deeper economic ties with China during his visit to Beijing.
  • Japan's January Corporate Services Price Index was up 2.6% yr/yr, as expected (last 2.6%). December BoJ Core CPI was up 1.7% yr/yr (expected 1.8%; last 1.9%).
  • Hong Kong's Q4 GDP expanded 1.0% qtr/qtr, as expected (last 0.9%), growing 3.8% yr/yr, as expected (last 3.7%). January CPI was up 0.2% m/m (last 0.3%), rising 1.1% yr/yr (expected 1.2%; last 1.4%).
  • Australia's January CPI was up 3.8% yr/yr (expected 3.7%; last 3.8%) and Q4 Construction Work Done was down 0.1% qtr/qtr (expected 1.2%; last 0.1%).
  • Eurozone's January CPI was down 0.6% m/m (expected -0.5%; last 0.2%) but up 1.7% yr/yr, as expected (last 1.9%). January Core CPI was up 2.2% yr/yr, as expected (last 2.3%).
  • Germany's Q4 GDP expanded 0.3% qtr/qtr, as expected (last 0.0%), growing 0.4% yr/yr, as expected (last 0.3%). March GfK Consumer Climate fell to -24.7 from -24.2 (expected -23.0).
  • France's February Consumer Confidence rose to 91 from 90 (expected 90).
  • Spain's January PPI was down 2.9% yr/yr (last -3.0%).
  • Swiss February ZEW Expectations rose to 9.8 from -4.7.
• Today's Data: 
  • The weekly MBA Mortgage Index rose 0.4% after increasing 2.8% a week ago. The Refinance Index was up 4.1% while the Purchase Index was down 4.7%.
  • Weekly crude oil inventories increased by 15.99 mln barrels after decreasing by 9.01 mln barrels a week ago.
  • $70 bln 5-year Treasury note auction results (prior 12-auction average):
    • High yield: 3.615% (3.842%).
    • Bid-to-cover: 2.32 (2.40).
    • Indirect bid: 62.5% (65.7%).
    • Direct bid: 24.7% (24.0%).
• Commodities: 
  • WTI crude: -0.3% to $65.47/bbl
  • Gold: +1.0% to $5226.40/ozt
  • Copper: +1.9% to $6.04/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1806
  • GBP/USD: +0.5% to 1.3550
  • USD/CNH: -0.4% to 6.8513
  • USD/JPY: +0.4% to 156.43
• The Day Ahead:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 211,000; prior 206,000) and Continuing Claims (prior 1.869 mln)
  • 12:00 ET: Weekly natural gas inventories (prior -144 bcf)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results