Bond Market Update

Quiet Finish to Solid Week

• U.S. Treasuries had a quiet finish to a week that featured a volatile showing from equities, which contributed to a week of gains in most tenors. The market followed Thursday's strong rally with a return to a subdued tone that persisted earlier in the week. Treasuries added to yesterday's gains at the open, briefly pressuring the 5-yr yield below its 50-day moving average (3.738%). However, the slim starting gains were erased quickly as stocks climbed out of the gate. The upbeat open in equities pressured Treasuries from highs, but the pullback was shallow, leaving action at levels seen on Thursday afternoon. The quiet Friday session ended with a flat finish in the 10-yr note while shorter tenors recorded slim losses, giving back some of their gains from Thursday. Crude oil bounced off its 200-day moving average (62.32), finishing the week near $63.50/bbl, while the U.S. Dollar Index fell 0.2% to 97.64, trimming this week's gain to 0.5%.
• Yield Check:
  • 2-yr: +1 bp to 3.50% (-3 bps this week)
  • 3-yr: +1 bp to 3.57% (-3 bps this week)
  • 5-yr: +1 bp to 3.76% (-4 bps this week)
  • 10-yr: UNCH at 4.21% (-3 bps this week)
  • 30-yr: -1 bp to 4.86% (-1 bp this week)

• News:
  • The Reserve Bank of India left its policy rate at 5.25%, as expected.
  • Reserve Bank of Australia Governor Bullock said that while inflation has fallen substantially, it will not return to target until mid-2027.
  • Japan's Lower House election will take place over the weekend with some speculating that the ruling coalition could win super majority.
  • Japan's December Household Spending was down 2.9% m/m (expected -1.3%; last 6.2%), falling 2.6% yr/yr (expected -0.5%; last 2.9%). December Leading Index rose to 110.2 from 109.9 (expected 109.8) and Coincident Indicator was down 0.4% m/m (last -1.0%).
  • South Korea's December Current Account surplus reached $18.70 bln (last surplus of $12.90 bln).
  • Germany's December trade surplus reached EUR17.1 bln (expected surplus of EUR14.1 bln; last surplus of EUR13.6 bln) as imports grew 1.4% m/m (expected 0.2%: last 0.7%) and exports rose 4.0% m/m (expected 1.0%; last -2.5%). December Industrial Production was down 1.9% m/m (expected -0.2%; last 0.2%), falling 0.6% yr/yr (last 0.4%).
  • U.K.'s January Halifax House Price Index was up 0.7% m/m (expected 0.1%; last -0.5%), rising 1.0% yr/yr (last 0.4%).
  • France's December trade deficit reached EUR4.8 bln (expected deficit of EUR3.8 bln; last deficit of EUR4.0 bln) and December Current Account deficit reached EUR600 mln (last deficit of EUR300 mln).
  • Spain's December Industrial Production was down 0.3% yr/yr (last 4.6%).
  • Swiss January Unemployment Rate fell to 2.9% from 3.0% (expected 3.0%).
• Today's Data:
  • The preliminary final University of Michigan Consumer Sentiment reading for February increased to 57.3 (Briefing.com consensus: 54.3) from the final reading of 56.4 for January. In the same period a year ago, the index stood at 64.7.
    • The key takeaway from the report is that there was a surge in sentiment among consumers with the largest stock portfolios, whereas it remained at "dismal levels" for consumers without stock holdings. [Note: interviews for this release ended this past Monday, so with steep losses in many tech stocks since then, there is a good chance of a downward revision when the final report is released on February 20, barring a sustained rebound effort.]
  • Consumer credit increased by $24.0 billion in December (Briefing.com consensus: $8.4 billion) following an upwardly revised $4.7 billion increase (from $4.2 billion) in November.
    • The key takeaway from the report is that there was a healthy expansion in consumer credit in December, driven by solid pickups in both revolving and nonrevolving credit. The December expansion was the biggest since March 2025.
• Commodities:
  • WTI crude: +0.5% to $63.58/bbl
  • Gold: +1.8% to $4980.00/ozt
  • Copper: +1.0% to $4.88/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1818
  • GBP/USD: +0.6% to 1.3613
  • USD/CNH: -0.1% to 6.9306
  • USD/JPY: UNCH at 157.09
• The Week Ahead:
  • Monday: Nothing of note
  • Tuesday: January NFIB Small Business Optimism (prior 99.5) at 6:00 ET; Q3 Employment Cost Index (Briefing.com consensus 0.8%; prior 0.8%), December Retail Sales (Briefing.com consensus 0.4%; prior 0.6%), Retail Sales ex-auto (Briefing.com consensus 0.4%; prior 0.5%), and December Import/Export Prices at 8:30 ET; November Business Inventories (Briefing.com consensus 0.2%; prior 0.3%) and November Factory Orders (Briefing.com consensus 0.5%; prior -1.3%) at 10:00 ET; and $58 bln 3-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -8.9%) at 7:00 ET; January Nonfarm Payrolls (Briefing.com consensus 68,000; prior 50,000), Nonfarm Private Payrolls (Briefing.com consensus 60,000; prior 37,000), Unemployment Rate (Briefing.com consensus 4.4%; prior 4.4%), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.3%), and Average Workweek (Briefing.com consensus 34.2; prior 34.2) at 8:30 ET; weekly crude oil inventories (prior -3.46 mln) at 10:30 ET; $42 bln 10-yr Treasury note auction results at 13:00 ET; and January Treasury Budget (Briefing.com consensus -$190.0 bln; prior -$144.7 bln) at 14:00 ET
  • Thursday: weekly Initial Claims (Briefing.com consensus 230,000; prior 231,000), and Continuing Claims (prior 1.844 mln) at 8:30 ET; January Existing Home Sales (Briefing.com consensus 4.21 mln; prior 4.35 mln) at 10:00 ET; weekly natural gas inventories (prior -360 bcf) at 10:30 ET; and $25 bln 30-yr Treasury bond auction results at 13:00 ET
  • Friday: January CPI (Briefing.com consensus 0.3%; prior 0.3%) and Core CPI (Briefing.com consensus 0.3%; prior 0.2%) at 8:30 ET

Sideway Action Continues

• U.S. Treasuries trade a bit above their morning lows, which is keeping the 30-yr bond just shy of its unchanged level while shorter tenors hold slight losses. Today's session has been uneventful, thanks in part to a lack of market-moving data, but the bounce in equities has also provided some reassurance. The long bond is currently on track to finish the week unchanged while the 2-yr note is on course for a modest gain with its yield down three basis points for the week.
• Yield Check:
  • 2-yr: +1 bp to 3.50%
  • 3-yr: +1 bp to 3.57%
  • 5-yr: +1 bp to 3.76%
  • 10-yr: +1 bp to 4.22%
  • 30-yr: UNCH at 4.87%

Data Recon

• The preliminary final University of Michigan Consumer Sentiment reading for February increased to 57.3 (Briefing.com consensus: 54.3) from the final reading of 56.4 for January. In the same period a year ago, the index stood at 64.7.
  • The key takeaway from the report is that there was a surge in sentiment among consumers with the largest stock portfolios, whereas it remained at "dismal levels" for consumers without stock holdings. [Note: interviews for this release ended this past Monday, so with steep losses in many tech stocks since then, there is a good chance of a downward revision when the final report is released on February 20, barring a sustained rebound effort.]
• Yield Check:
  • 2-yr: +1 bp to 3.50%
  • 3-yr: +1 bp to 3.57%
  • 5-yr: +1 bp to 3.76%
  • 10-yr: +1 bp to 4.22%
  • 30-yr: UNCH at 4.87%

Opening Gains Reversed

• U.S. Treasuries trade on their lows after backpedaling from their morning highs. Treasuries started the day in positive territory, reaching their best levels about an hour after the cash start. Shorter tenors have led the pullback from morning highs, with Treasuries slipping alongside an upbeat open in equities. Reported not long ago, the preliminary reading of the University of Michigan's Consumer Sentiment Index for February rose to 57.3 (Briefing.com consensus 54.3) from 56.4 in January.
• Yield Check:
  • 2-yr: +1 bp to 3.50%
  • 3-yr: +1 bp to 3.57%
  • 5-yr: +1 bp to 3.76%
  • 10-yr: +1 bp to 4.22%
  • 30-yr: UNCH at 4.87%

Quiet Start Ahead

• U.S. Treasuries are on track for a flat start. Treasury futures spent the overnight session in a sideways range with a slight downward bias, making for a shallow pullback from yesterday's rally that accompanied ongoing weakness in equities. Investor sentiment improved a touch overnight, with equity futures pointing to a higher start in the U.S. after a mixed night in global markets. Investors received a few economic reports, but the overall market impact has been subdued. However, it is worth noting that Stellantis is down nearly 30% in Europe after recording a EUR22.2 bln writedown due to mounting losses from its electric vehicle strategy. Crude oil holds a modest loss while the U.S. Dollar Index is flat at 97.83.
• Yield Check:
  • 2-yr: UNCH at 3.49%
  • 3-yr: UNCH at 3.56%
  • 5-yr: UNCH at 3.75%
  • 10-yr: UNCH at 4.21%
  • 30-yr: UNCH at 4.86%

• News:
  • The Reserve Bank of India left its policy rate at 5.25%, as expected.
  • Reserve Bank of Australia Governor Bullock said that while inflation has fallen substantially, it will not return to target until mid-2027.
  • Japan's Lower House election will take place over the weekend with some speculating that the ruling coalition could win super majority.
  • Japan's December Household Spending was down 2.9% m/m (expected -1.3%; last 6.2%), falling 2.6% yr/yr (expected -0.5%; last 2.9%). December Leading Index rose to 110.2 from 109.9 (expected 109.8) and Coincident Indicator was down 0.4% m/m (last -1.0%).
  • South Korea's December Current Account surplus reached $18.70 bln (last surplus of $12.90 bln).
  • Germany's December trade surplus reached EUR17.1 bln (expected surplus of EUR14.1 bln; last surplus of EUR13.6 bln) as imports grew 1.4% m/m (expected 0.2%: last 0.7%) and exports rose 4.0% m/m (expected 1.0%; last -2.5%). December Industrial Production was down 1.9% m/m (expected -0.2%; last 0.2%), falling 0.6% yr/yr (last 0.4%).
  • U.K.'s January Halifax House Price Index was up 0.7% m/m (expected 0.1%; last -0.5%), rising 1.0% yr/yr (last 0.4%).
  • France's December trade deficit reached EUR4.8 bln (expected deficit of EUR3.8 bln; last deficit of EUR4.0 bln) and December Current Account deficit reached EUR600 mln (last deficit of EUR300 mln).
  • Spain's December Industrial Production was down 0.3% yr/yr (last 4.6%).
  • Swiss January Unemployment Rate fell to 2.9% from 3.0% (expected 3.0%).
• Commodities:
  • WTI Crude: -0.4% to $63.07/bbl
  • Gold: +0.4% to $4908.30/ozt
  • Copper: -0.2% to $5.813/lb
• Currencies:
  • EUR/USD: +0.1% to 1.1792
  • GBP/USD: +0.5% to 1.3592
  • USD/CNH: UNCH at 6.9368
  • USD/JPY: UNCH at 157.11
• Data out Today: 
  • 10:00 ET: Preliminary February University of Michigan Consumer Sentiment (Briefing.com consensus 54.3; prior 56.4)
  • 15:00 ET: December Consumer Credit (Briefing.com consensus $8.4 bln; prior $4.2 bln)