Bond Market Update

Quiet Start Ahead

• U.S. Treasuries are on track for a flat start after a quiet night in the futures market, even though there was a fair dose of news and economic developments. The Bank of Japan formalized its 25-basis point rate hike, which was telegraphed well ahead of last night, and raised its CPI forecast for fiscal 25/26. Flash Manufacturing PMI reading from Japan (48.8) and Australia (49.8) remained in contraction while Services readings pointed toward continued expansion in both economies. Meanwhile, flash Manufacturing PMI readings from Germany (44.1), France (45.3), and the U.K. (48.2) remained in contraction, but they were a bit better than expected, while Services PMI readings were little changed from December, pointing to ongoing expansion in Germany (52.5) and the U.K. (51.2) and a slight contraction in France (48.9). This was good enough to lift the euro to a five-week high against the dollar while the pound extended its bounce off levels last seen in November 2023. Crude oil is rising off a two-week low back to its 200-day moving average (75.10) while the U.S. Dollar Index is down 0.4% at 107.66.
• Yield Check:
  • 2-yr: UNCH at 4.28%
  • 3-yr: -1 bp to 4.34%
  • 5-yr: +1 bp to 4.45%
  • 10-yr: UNCH at 4.64%
  • 30-yr: UNCH at 4.87%

• News:
  • President Trump said that he would prefer not to implement tariffs on imports from China.
  • The Bank of Japan maintained its growth forecast for FY25/26 at 1.1% and raised its CPI forecast to 2.4% from 1.9%.
  • People's Bank of China left its one-year medium term lending facility rate at 2.00%.
  • The Monetary Authority of Singapore announced a slight easing of its policy for the first time since 2020.
  • Japan's December National CPI was up 0.6% m/m (last 0.4%), rising 3.6% yr/yr (last 2.9%). December National Core CPI was up 3.0% yr/yr, as expected (last 2.7%). Flash January Manufacturing PMI hit 48.8 (expected 49.7; last 49.6) and flash Services PMI hit 52.7 (last 50.9).
  • India's flash January Manufacturing PMI hit 58.0 (expected 56.7; last 56.4) and flash Services PMI hit 56.8 (expected 59.5; last 59.3).
  • Singapore's Q4 URA Property Index was up 2.3% qtr/qtr (last -0.7%). December Industrial Production was down 0.7% m/m (expected -1.2%; last 1.7%) but up 10.6% yr/yr (expected 6.4%; last 10.8%).
  • Australia's flash January Manufacturing PMI hit 49.8 (last 47.8) and flash Services PMI hit 50.4 (last 50.8).
  • New Zealand's December Credit Card Spending was down 1.4% yr/yr (last -3.1%).
  • Eurozone's flash January Manufacturing PMI hit 46.1 (expected 45.6; last 45.1) and flash Services PMI hit 51.4, as expected (last 51.6).
  • Germany's flash January Manufacturing PMI hit 44.1 (expected 42.7; last 42.5) and flash Services PMI hit 52.5 (expected 51.1; last 51.2).
  • U.K.'s flash January Manufacturing PMI hit 48.2 (expected 46.9; last 47.0) and flash Services PMI hit 51.2 (expected 50.8; last 51.1). January CBI Distributive Trades Survey fell to -24 from -15 (expected -11).
  • France's flash January Manufacturing PMI hit 45.3 (expected 42.4; last 41.9) and flash Services PMI hit 48.9 (expected 49.3; last 49.3).
  • Spain's December PPI was up 2.3% yr/yr (last 0.9%).
• Commodities:
  • WTI Crude: +0.5% to $74.98/bbl
  • Gold: +0.7% to $2784.50/ozt
  • Copper: +1.0% to $4.371/lb
• Currencies:
  • EUR/USD: +0.6% to 1.0477
  • GBP/USD: +0.5% to 1.2410
  • USD/CNH: -0.5% to 7.2506
  • USD/JPY: +0.3% to 156.41
• Data out Today:
  • 9:45 ET: Flash January S&P Global U.S. Manufacturing PMI (prior 49.4) and flash January S&P Global U.S. Services PMI (prior 56.8)
  • 10:00 ET: December Existing Home Sales (Briefing.com consensus 4.21 mln; prior 4.15 mln) and final January University of Michigan Consumer Sentiment (Briefing.com consensus 73.0; prior 74.0)