Bond Market Update

Long End Ahead

• U.S. Treasuries are on track for a higher start after Monday's holiday closure. Yesterday was also inauguration day, which saw a raft of executive orders, as expected. The Trump administration did not announce immediate tariffs on imports from China, but China's adherence to the U.S.-China trade agreement will be assessed. The new president was quoted as saying that Canada and Mexico could face a 25% tariff as early as February 1. Meanwhile in Europe, expectations for multiple rate cuts from the European Central Bank are solidifying after policymaker Kazimir said that up to four rate cuts could be made at consecutive policy meetings. The market will not receive any domestic economic data today. Crude oil is falling toward its 200-day moving average (75.27) while the U.S. Dollar Index is down 0.6% at 108.71.
• Yield Check:
  • 2-yr: UNCH at 4.27%
  • 3-yr: -1 bp to 4.32%
  • 5-yr: -1 bp to 4.40%
  • 10-yr: -3 bps to 4.58%
  • 30-yr: -4 bps to 4.81%

• News:
  • The U.S. will leave the World Health Organization and the Paris climate agreement.
  • President Trump rescinded the Biden administration's ban on oil drilling in the Arctic Sea.
  • China's President Xi repeated that a more proactive macroeconomic policy will be sought in 2025.
  • Japan's Economy Minister Muto said that his country wants to cooperate with the U.S. on semiconductor development.
  • South Korea's acting president Choi said that his country wants to cooperate with the U.S. on shipbuilding.
  • European Central Bank policymaker Kazimir said that a January rate cut is certain and that there could be three or four rate cuts in a row.
  • Hong Kong's December CPI was up 0.1% m/m (last 0.0%), rising 1.4% yr/yr (expected 1.5%; last 1.4%).
  • South Korea's December PPI was up 0.3% m/m (last 0.1%), rising 1.7% yr/yr (last 1.4%).
  • New Zealand's December Electronic Card Retail Sales rose 2.0% m/m (last 0.1%) but were down 1.0% yr/yr (last -2.3%). December RBNZ Offshore Holdings rose to 59.2% from 58.6%.
  • Eurozone's January ZEW Economic Sentiment hit 18.0 (expected 16.9; last 17.0)
  • Germany's January ZEW Economic Sentiment hit 10.3 (expected 15.2; last 15.7) and ZEW Current Conditions hit -90.4 (expected -93.1; last -93.1).
  • U.K.'s November Average Earnings Index + Bonus rose 5.6% yr/yr, as expected (last 5.2%). November three-month employment increased by 35,000, as expected (last 173,000) and November Unemployment Rate rose to 4.4% from 4.3% (expected 4.3%).
• Commodities:
  • WTI Crude: -2.4% to $75.57/bbl
  • Gold: -0.4% to $2736.70/ozt
  • Copper: -1.8% to $4.289/lb
• Currencies:
  • EUR/USD: -0.6% to 1.0349
  • GBP/USD: -0.7% to 1.2242
  • USD/CNH: +0.4% to 7.2861
  • USD/JPY: +0.1% to 155.85
• No Data on Today's Schedule