Bond Market Update

Short End Leads

• U.S. Treasuries are on track for a higher start in shorter tenors while the long end is expected to show some relative weakness in the early going. True to this week's form, the overnight session was quiet, with action confined to a narrow range until a recent push to highs. There has been some renewed volatility in precious metals while other sovereign debt has seen limited movement despite two major central bank meetings. However, the Bank of England did not make any policy changes while the European Central Bank is also expected to announce a policy hold in the next few minutes. Economic data released overnight showed disappointing December Retail Sales from the eurozone (-0.5%; expected -0.2%) while Germany reported an unexpected jump in Factory Orders for December (7.8%; expected -1.8%). The U.S. session will feature the latest jobless claims report at 8:30 ET, followed by the 10:00 ET release of December Job Openings (prior 7.146 mln), which was originally scheduled for a Tuesday release. Crude oil has fallen back below $64/bbl while the U.S. Dollar Index is up 0.1% at 97.75.
• Yield Check:
  • 2-yr: -3 bps to 3.53%
  • 3-yr: -3 bps to 3.61%
  • 5-yr: -2 bps to 3.81%
  • 10-yr: -2 bps to 4.26%
  • 30-yr: -1 bp to 4.91%

• News:
  • The Bank of England voted 5-4 to keep its bank rate at 3.75%.
  • The European Central Bank is expected to keep its deposit facility rate at 2.00%, interest rate at 2.15%, and marginal facility lending rate at 2.40%.
  • There was some speculation that Japan's Prime Minister Takaichi might not live up to her pledge to cut taxes on food due to worries about the fiscal impact.
  • Expectations for a near-term reserve requirement ratio cut from the People's Bank of China are on the low side, though the potential for a cut in the second quarter remains alive.
  • Shipper Maersk announced that some corporate positions will be cut and confirmed resumption of transit through the Red Sea.
  • Australia's December trade surplus reached AUD3.373 bln (expected surplus of AUD3.420 bln; last surplus of AUD2.597 bln) as imports fell 0.8% m/m (last -0.2%) and exports rose 1.0% m/m (last -4.0%).
  • Singapore's December Retail Sales fell 5.4% m/m (last -0.2%) but were up 2.7% yr/yr (last 6.2%).
  • Eurozone's December Retail Sales decreased 0.5% m/m (expected -0.2%; last 0.1%) but were up 1.3% yr/yr (expected 1.6%; last 2.4%).
  • Germany's December Factory Orders rose 7.8% m/m (expected -1.8%; last 5.7%).
  • U.K.'s January S&P Global Construction PMI hit 46.4 (expected 42.2; last 40.1).
  • France's December Industrial Production was down 0.7% m/m (expected 0.2%; last 0.1%).
  • Italy's December Retail Sales decreased 0.8% m/m (expected -0.4%; last 0.5%) but were up 0.9% yr/yr (last 1.3%).
• Commodities:
  • WTI Crude: -2.3% to $63.64/bbl
  • Gold: -1.3% to $4883.60/ozt
  • Copper: -1.2% to $5.778/lb
• Currencies:
  • EUR/USD: -0.1% to 1.1799
  • GBP/USD: -0.5% to 1.3578
  • USD/CNH: UNCH at 6.9380
  • USD/JPY: +0.1% to 156.94
• Data out Today:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 210,000; prior 209,000) and Continuing Claims (prior 1.827 mln)
  • 10:00 ET: December Job Openings (prior 7.146 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -242 bcf)