Bond Market Update

Trimming Midweek Gains

• U.S. Treasuries are on track to give back some of their gains from Wednesday ahead of the 8:30 ET release of December Retail Sales (Briefing.com consensus 0.5%; prior 0.7%) and weekly Initial Claims (Briefing.com consensus 212,000; prior 201,000). Treasury futures spent the night in a slow retreat, reaching their lowest levels during the past hour. The belly has been at the forefront of the selling after outperforming yesterday. The market received a sizable batch of news, including speculation about a reserve requirement ratio cut from the People's Bank of China and more signs pointing to a rate hike from the Bank of Japan at the end of next week. Crude oil is giving back some of its advance from yesterday while the U.S. Dollar Index is up 0.2% at 109.25.
• Yield Check:
  • 2-yr: +4 bps to 4.30%
  • 3-yr: +4 bps to 4.38%
  • 5-yr: +5 bps to 4.49%
  • 10-yr: +3 bps to 4.68%
  • 30-yr: +2 bps to 4.90%

• News:
  • Treasury Secretary nominee Bessent will say during his Senate testimony that the dollar's reserve currency status must be preserved.
  • Bank of Korea left its policy rate at 3.00% against expectations for a 25-basis point cut, though Governor Rhee acknowledged that policymakers believe that rate cuts will be necessary in the coming months.
  • Shanghai Securities News speculated that the People's Bank of China will lower the reserve requirement ratio before the end of the month.
  • A survey conducted by the Bank of England found that lenders reported higher funding volumes between September and November, but a decrease was expected in the following three-month period.
  • Japan Center for Economic Research expects large companies to increase pay by 4.7%.
  • Japan's December PPI was up 0.3% m/m (expected 0.4%; last 0.4%), rising 3.8% yr/yr, as expected (last 3.8%).
  • Australia's January MI Inflation Expectations decelerated to 4.0% from 4.2%. December employment increased by 56,300 (expected 14,500; last 28,200) while full employment decreased by 23,700 (last 49,500). December Unemployment Rate rose to 4.0% from 3.9%, as expected, and Participation Rate ticked up to 67.1% from 67.0% (expected 67.0%).
  • New Zealand's December FPI was up 0.1% m/m (last -0.1%).
  • Eurozone's November trade surplus reached EUR16.4 bln (expected surplus of EUR11.8 bln; last surplus of EUR8.6 bln).
  • Germany's December CPI was up 0.5% m/m (expected 0.4%; last -0.2%), rising 2.6% yr/yr, as expected (last 2.2%).
  • U.K.'s November GDP expanded 0.1% m/m (expected 0.2%; last -0.1%), growing 1.0% yr/yr (expected 1.3%; last 1.1%). November Construction Output was up 0.4% m/m, as expected (last -0.3%), rising 0.2% yr/yr (expected 0.1%; last -0.5%). November Industrial Production was down 0.4% m/m (expected 0.1%; last -0.6%), falling 1.8% yr/yr (expected -1.0%; last -1.1%). November Manufacturing Production was down 0.3% m/m (expected -0.2%; last -0.6%), falling 1.2% yr/yr (expected -0.4%; last -0.4%). November trade deficit reached GBP19.31 bln (expected deficit of GBP18.00 bln; last deficit of GBP19.33 bln).
  • Italy's December CPI was up 0.1% m/m, as expected (last -0.1%), rising 1.3% yr/yr, as expected (last 1.3%). November trade surplus reached EUR4.218 bln (expected surplus of EUR4.500 bln; last surplus of EUR5.067 bln).
• Commodities:
  • WTI Crude: -0.9% to $79.33/bbl
  • Gold: +0.4% to $2728.90/ozt
  • Copper: +0.3% to $4.40/lb
• Currencies:
  • EUR/USD: -0.1% to 1.0272
  • GBP/USD: -0.3% to 1.2194
  • USD/CNH: UNCH at 7.3481
  • USD/JPY: -0.2% to 156.13
• Data out Today:
  • 8:30 ET: December Retail Sales (Briefing.com consensus 0.5%; prior 0.7%), Retail Sales ex-auto (Briefing.com consensus 0.5%; prior 0.2%), weekly Initial Claims (Briefing.com consensus 212,000; prior 201,000), Continuing Claims (prior 1.867 mln), January Philadelphia Fed survey (Briefing.com consensus -6.0; prior -16.4), December Import Prices (prior 0.1%), Import Prices ex-oil (prior 0.0%), Export Prices (prior 0.0%), and Export Prices ex-agriculture (prior 0.1%)
  • 10:00 ET: November Business Inventories (Briefing.com consensus 0.1%; prior 0.1%) and January NAHB Housing Market Index (Briefing.com consensus 45; prior 46)
  • 10:30 ET: Weekly natural gas inventories (prior -40 bcf)