Bond Market Update

Long End Leads Early Selling

• U.S. Treasuries are on track for another lower start with the long end expected to show some relative weakness in the early going after outperforming yesterday. Treasury futures spent the early part of the night in a sideways range, slipping to lows as the focus shifted to action in Europe. However, the slip to lows was partially retraced over the past couple hours. Geopolitical concerns have remained in place, though investor sentiment has seen some improvement during the European session after a night of heavy losses in Asian markets, headlined by a 12.1% plunge in South Korea's Kospi. The market received a big batch of data, including contractionary official February PMI readings from China while private sector readings showed accelerating growth. The eurozone's final February Services PMI (51.9; expected 51.8) was a touch better than expected while the January Unemployment Rate dipped to 6.1% from 6.2%. Crude oil holds a slim loss after a failed run at yesterday's high while the U.S. Dollar Index is down 0.2% at 98.86.
• Yield Check:
  • 2-yr: +1 bp to 3.51%
  • 3-yr: +1 bp to 3.52%
  • 5-yr: +2 bps to 3.65%
  • 10-yr: +2 bps to 4.08%
  • 30-yr: +2 bps to 4.72%

• News:
  • French Finance Minister Lescure said that there is no risk of energy shortages in the coming weeks.
  • Italy's Energy Minister Fratin said that his country is safe when it comes to gas supplies with no severe risk in sight.
  • China's February Manufacturing PMI hit 49.0 (expected 49.1; last 49.3) and Non-Manufacturing PMI hit 49.5 (expected 49.8; last 49.4). February RatingDog Manufacturing PMI hit 52.1 (expected 50.1; last 50.3) and RatingDog Services PMI hit 56.7 (expected 52.3; last 52.3).
  • Japan's February Services PMI hit 53.8, as expected (last 53.7) and February Household Confidence rose to 40.0 from 37.9 (expected 38.2).
  • South Korea's January Retail Sales rose 2.3% m/m (last 0.6%), January Industrial Production fell 1.9% m/m (expected 0.5%; last 1.5%) but was up 7.1% yr/yr (expected 2.2%; last 1.4%).
  • Hong Kong's February Manufacturing PMI hit 53.3 (last 52.3) and January Retail Sales rose 5.5% yr/yr (last 6.6%).
  • Australia's February Services PMI hit 52.8 (expected 52.2; last 56.3). Q4 GDP expanded 0.8% qtr/qtr (expected 0.7%; last 0.5%), growing 2.6% yr/yr (expected 2.2%; last 2.1%). Q4 GDP Chain Price Index was up 1.4% (last 0.8%).
  • New Zealand's Q4 Terms of Trade Index was up 3.7% qtr/qtr (expected -0.1%; last -2.1%).
  • India's February Services PMI hit 58.1 (expected 58.4; last 58.5).
  • Eurozone's February Services PMI hit 51.9 (expected 51.8; last 51.8). January Unemployment Rate fell to 6.1% from 6.2% (expected 6.2%), and January PPI was up 0.7% m/m (expected 0.2%; last -0.3%) but down 2.1% yr/yr (expected -2.7%; last -2.0%).
  • Germany's February Services PMI hit 53.5 (expected 53.4; last 53.4).
  • U.K.'s February Services PMI hit 53.9, as expected (last 53.9).
  • France's February Services PMI hit 49.6, as expected (last 49.6).
  • Italy's Q4 GDP was up 0.3% qtr/qtr, as expected (last 0.2%), rising 0.8% yr/yr, as expected (last 0.7%). January Unemployment Rate fell to 5.1% from 5.5% (expected 5.6%). February Services PMI hit 52.3 (expected 52.6; last 52.9).
  • Spain's February Services PMI hit 51.9 (expected 52.9; last 53.5).
  • Swiss February CPI was up 0.6% m/m (expected 0.5%; last -0.1%), rising 0.1% yr/yr (expected -0.1%; last 0.1%).
• Commodities:
  • WTI crude: -0.2% to $74.48/bbl
  • Gold: +1.1% to $5179.30/ozt
  • Copper: +1.3% to $5.901/lb
• Currencies:
  • EUR/USD: +0.2% to 1.1638
  • GBP/USD: +0.1% to 1.3364
  • USD/CNH: -0.3% to 6.8968
  • USD/JPY: -0.3% to 157.22
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 11.0%; prior 0.4%)
  • 8:15 ET: February ADP Employment Change (Briefing.com consensus 42,000; prior 22,000)
  • 9:45 ET: Final February S&P Global U.S. Services PMI (prior 52.3)
  • 10:00 ET: February ISM Non-Manufacturing Index (Briefing.com consensus 53.9%; prior 53.8%)
  • 10:30 ET: Weekly crude oil inventories (prior +15.989 mln)