Bond Market Update

Pulling Back

• U.S. Treasuries are on track to give back some of their gains from Monday with the belly expected to lead the early selling. Treasury futures followed yesterday's rally with a sideways start to the night amid light volume owed to holiday closures in China and South Korea, and an early close in Hong Kong. The market fell to lows during the European session before seeing a shallow rebound over the past few hours. Risk sentiment has improved following yesterday's tech rout and the overall news flow has been on the light side. It is worth noting that the newly-confirmed Treasury Secretary Bessent reportedly wants to see tariffs increase by 2.5% on a monthly basis, but President Trump wants bigger increases. Crude oil is looking to reclaim some of yesterday's loss while the U.S. Dollar Index is up 0.6% at 107.99.
• Yield Check:
  • 2-yr: +2 bps to 4.21%
  • 3-yr: +2 bps to 4.26%
  • 5-yr: +3 bps to 4.36%
  • 10-yr: +3 bps to 4.56%
  • 30-yr: +3 bps to 4.80%

• News:
  • The Senate voted 68-20 to confirm Scott Bessent as the new Treasury Secretary.
  • Japan's opposition is threatening to block a budget if Prime Minister Ishiba does not agree to a higher tax-free allowance.
  • China Vanke will receive state support after two executives resigned. The company expects to record a $6.2 bln net loss for 2024.
  • The European Central Bank's Q4 lending survey showed a larger than expected tightening in corporate credit with more tightening expected in 2025.
  • British Prime Minister Starmer repeated that boosting growth is a top priority for his government.
  • Swiss National Bank Chairman Schlegel said that inflation is expected to be low this year and that rates could go negative if needed.
  • Japan's November BoJ Core CPI was up 1.9% yr/yr (expected 1.7%; last 1.7%) and December Corporate Services Price Index was up 2.9% yr/yr (expected 3.2%; last 3.0%).
  • Hong Kong's December M3 Money Supply increased 2.8% (last 2.4%).
  • Australia's December NAB Business Survey rose to 6 from 2 and Business Confidence ticked up to -2 from -3.
  • France's January Consumer Confidence rose to 92 from 89 (expected 90).
  • Spain's Q4 Unemployment Rate fell to 10.6% from 11.2% (expected 11.1%).
• Commodities:
  • WTI Crude: +0.7% to $73.68/bbl
  • Gold: +0.4% to $2747.90/ozt
  • Copper: +0.6% to $4.258/lb
• Currencies:
  • EUR/USD: -0.6% to 1.0424
  • GBP/USD: -0.5% to 1.2431
  • USD/CNH: +0.3% to 7.2738
  • USD/JPY: +0.5% to 155.25
• Data out Today:
  • 8:30 ET: December Durable Orders (Briefing.com consensus 0.4%; prior -1.1%) and Durable Orders ex-transport (Briefing.com consensus 0.5%; prior -0.1%)
  • 9:00 ET: November FHFA Housing Price Index (prior 0.4%) and November S&P Case-Shiller Home Price Index (Briefing.com consensus 4.2%; prior 4.2%)
  • 10:00 ET: January Consumer Confidence (Briefing.com consensus 108.1; prior 104.7)
• Treasury Auctions:
  • 13:00 ET: $44 bln 7-yr Treasury note auction results