Bond Market Update

 Short End Inches Higher

• U.S. Treasuries are on track for a largely flat start with shorter tenors expected to show some relative strength after underperforming yesterday. Treasury futures faced some pressure in early evening trade but recovered the bulk of those losses during a rally that took place as markets in Europe opened for the day with several European Central Bank policymakers, including President Lagarde, speaking about gradual rate cuts being appropriate at this time. Before that, President Trump said last evening that imports from China could be hit with a 10% tariff as early as the start of February. The market will not receive any top-tier data today, but the U.S. Treasury will reopen $13 bln in 20-yr bonds at 13:00 ET. Crude oil is bouncing off its 200-day moving average (75.22) while the U.S. Dollar Index is down 0.1% at 107.95.
• Yield Check:
  • 2-yr: -1 bp to 4.27%
  • 3-yr: -1 bp to 4.32%
  • 5-yr: UNCH at 4.40%
  • 10-yr: UNCH at 4.57%
  • 30-yr: UNCH at 4.80%

• News:
  • The market is almost certain that the Bank of Japan will announce a 25-basis point rate hike on Friday.
  • British Chancellor Reeves insisted that the U.K.'s public finances are now in order.
  • South Korea's January Consumer Confidence rose to 91.2 from 88.4.
  • Australia's December MI Leading Index was unchanged (last 0.1%).
  • New Zealand's Q4 CPI was up 0.5% qtr/qtr, as expected (last 0.6%), rising 2.2% yr/yr (expected 2.1%; last 2.2%).
  • U.K.'s December Public Sector Net Borrowing reached GBP17.81 bln (expected GBP14.20 bln; last GBP11.80 bln) and Public Sector Net Cash Requirement reached GBP19.88 bln (last GBP13.13 bln).
• Commodities:
  • WTI Crude: UNCH at $75.79/bbl
  • Gold: +0.3% to $2768.20/ozt
  • Copper: -0.7% to $4.31/lb
• Currencies:
  • EUR/USD: +0.1% to 1.0439
  • GBP/USD: UNCH at 1.2357
  • USD/CNH: +0.1% to 7.2712
  • USD/JPY: +0.2% to 155.81
• Data out Today:
  • 7:00 ET: Weekly MBA Mortgage Index (actual 0.1%; prior 33.3%)
  • 10:00 ET: December Leading Indicators (Briefing.com consensus 0.0%; prior 0.3%)
  • 10:30 ET: Weekly crude oil inventories (prior -1.96 mln)
• Treasury Auctions:
  • 13:00 ET: $13 bln 20-yr Treasury bond reopening results