Bond Market Update

Boosted by Pressure on Risk

• U.S. Treasuries are on track for a sharply higher start after a night that saw pressure on overall risk sentiment and a bid for Treasuries and other sovereign debt. A Chinese start-up published an AI-model that appears to be less resource-intensive than alternatives like ChatGPT. U.S. chipmakers have been at the forefront of the weakness due to a fear that their leadership position is getting challenged. Treasury futures began rising in early evening action, accelerating their advance once the focus turned to Europe. The rally comes ahead of today's scheduled sales of $69 bln in 2-yr notes and $70 bln in 5-yr notes. Crude oil continues trading below its 200-day moving average (75.04) while the U.S. Dollar Index is down 0.3% at 107.13, staying below the 50-day moving average (107.58) of its own.
• Yield Check:
  • 2-yr: -8 bps to 4.19%
  • 3-yr: -10 bps to 4.23%
  • 5-yr: -10 bps to 4.33%
  • 10-yr: -10 bps to 4.53%
  • 30-yr: -8 bps to 4.77%

• News:
  • Bank of Japan Governor Ueda said that there is no preset idea regarding future rate adjustments and that the neutral rate is a long way from being achieved.
  • European Central Bank President Lagarde complained that maintaining price stability could be more difficult due to increased volatility.
  • Japan's November Leading Index fell to 107.5 from 109.1 (expected 107.0) and Coincident Indicator was down 1.4% m/m (expected -1.5%; last 2.8%).
  • Hong Kong's December trade deficit reached $34.5 bln (last deficit of $43.4 bln) as imports fell 1.1% m/m (last 5.7%) and exports rose 5.2% m/m (last 2.1%).
  • China's January Manufacturing PMI hit 49.1 (expected 50.1; last 50.1) and Non-Manufacturing PMI hit 50.2 (last 52.2)
  • Singapore's Q4 Unemployment Rate 1.9% (last 1.9%)
  • Germany's January ifo Business Climate Index hit 85.1 (expected 84.9; last 84.7). January Current Assessment hit 86.1 (expected 85.4; last 85.1) and Business Expectations hit 84.2 (expected 84.2; last 84.4).
  • France's December jobseekers increased to 2.957 mln from 2.935 mln.
• Commodities:
  • WTI Crude: -0.5% to $74.29/bbl
  • Gold: -0.4% to $2767.90/ozt
  • Copper: -0.6% to $4.294/lb
• Currencies:
  • EUR/USD: +0.3% to 1.0520
  • GBP/USD: +0.3% to 1.2511
  • USD/CNH: UNCH at 7.2423
  • USD/JPY: -1.2% to 154.04
• Data out Today:
  • 10:00 ET: December New Home Sales (Briefing.com consensus 680,000; prior 664,000)
• Treasury Auctions:
  • 11:30 ET: $69 bln 2-yr Treasury note auction results
  • 13:00 ET: $70 bln 5-yr Treasury note auction results