Bond Market Update

Longer Tenors Ahead as December CPI Looms

• U.S. Treasuries are on track for a higher start leading up to the 8:30 ET release of December CPI (Briefing.com consensus 0.3%; prior 0.3%) and Core CPI (Briefing.com consensus 0.2%; prior 0.3%), which will follow yesterday's cooler-than-expected PPI (0.2%; Briefing.com consensus 0.3%) and core PPI (0.0%; Briefing.com consensus 0.2%). Treasury futures climbed steadily through the night, facing some brief resistance at the start of the European session, which has seen the release of a cooler-than-expected December CPI (0.3%; expected 0.4%) from the U.K., which has boosted expectations for a rate cut from the Bank of England. In the U.S., large banks have started reporting their Q4 results with JPMorgan Chase (JPM) and Goldman Sachs (GS) beating top- and bottom-line estimates while Wells Fargo (WFC) beat earnings expectations on revenue that was a bit shy of expectations. Crude oil is recovering some of yesterday's loss while the U.S. Dollar Index is down 0.1% at 109.12.
• Yield Check:
  • 2-yr: -1 bp to 4.35%
  • 3-yr: -2 bps to 4.45%
  • 5-yr: -3 bps to 4.56%
  • 10-yr: -3 bps to 4.76%
  • 30-yr: -3 bps to 4.95%

• News:
  • The International Energy Agency lowered its 2025 global oil demand growth forecast to 1.05 million barrels per day from 1.1 Mb/d while the supply growth forecast was lowered to 1.8 Mb/d from 1.9 Mb/d.
  • The People's Bank of China injected nearly a trillion yuan through reverse repurchases to offset the impact of tax payments and maturing medium-term loans.
  • Bank of Japan Governor Ueda indicated that next week's policy meeting could result in a rate change.
  • The U.K.'s chief secretary to the Treasury said that there is no need for an emergency spring budget despite the recent weakness in Gilts and the pound.
  • European Central Bank policymaker De Guindos said that the risk has shifted from high inflation to low growth, adding that disinflationary forces are on track.
  • Japan's January Reuters Tankan Index rose to 2 from -1. December Machine Tool Orders were up 11.2% yr/yr (expected 3.0%; last 9.3%). December M2 Money Stock increased 1.3% yr/yr (expected 1.2%; last 1.2%).
  • South Korea's December Unemployment Rate jumped to 3.7% from 2.7%. December trade surplus reached $6.49 bln, as expected (last $5.59 bln) as imports grew 3.3% yr/yr, as expected (last -2.4%) and exports rose 6.6% yr/yr, as expected (last 1.4%). December Import Price Index was up 7.0% yr/yr (last 2.8%) and Export Price Index was up 10.7% yr/yr (last 7.0%).
  • India's December trade deficit reached $21.94 bln (last deficit of $37.84 bln).
  • Eurozone's November Industrial Production was up 0.2% m/m (expected 0.3%; last 0.2%) but down 1.9% yr/yr, as expected (last -1.1%).
  • Germany's December WPI ticked up 0.1% m/m, as expected (last 0.0%), rising 0.1% yr/yr (last -0.6%). 2024 GDP contracted 0.2%, as expected (last -0.3%).
  • U.K.'s December CPI was up 0.3% m/m (expected 0.4%; last 0.1%), rising 2.5% yr/yr (expected 2.6%; last 2.6%). December Core CPI was up 0.3% m/m (expected 0.5%; last 0.0%), rising 3.2% yr/yr (expected 3.4%; last 3.5%). December Input PPI was up 0.1% m/m (expected 0.2%; last 0.0%) but down 1.5% yr/yr (expected -1.3%; last -2.1%) and Output PPI was up 0.1% m/m, as expected (last 0.4%) and up 0.1% yr/yr (expected 0.0%; last -0.5%).
  • France's December CPI was up 0.2% m/m, as expected (last -0.1%), rising 1.3% yr/yr, as expected (last 1.3%).
  • Spain's December CPI was up 0.5% m/m (expected 0.4%; last 0.2%), rising 2.8% yr/yr, as expected (last 2.4%). December Core CPI was up 2.6% yr/yr, as expected (last 2.4%).
• Commodities:
  • WTI Crude: +0.4% to $76.67/bbl
  • Gold: +0.9% to $2706.60/ozt
  • Copper: +0.2% to $4.352/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0300
  • GBP/USD: UNCH at 1.2210
  • USD/CNH: UNCH at 7.3421
  • USD/JPY: -0.7% to 156.94
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 33.3%; prior -3.7%) 
  • 8:30 ET: December CPI (Briefing.com consensus 0.3%; prior 0.3%), Core CPI (Briefing.com consensus 0.2%; prior 0.3%), and January Empire State Manufacturing (Briefing.com consensus -2.0; prior 0.2)
  • 10:30 ET: Weekly crude oil inventories (prior -959,000)
  • 14:00 ET: January Beige Book